Report to the Chairman, Subcommittee

on Oversight, Committee on Ways and

Means, House of Representatives

United States General Accounting Office

GAO

December 2001 TAX

ADMINISTRATION

Assessment of IRS'

2001 Tax Filing

Season

GAO-02-144
Page i GAO-02-144 IRS' 2001 Tax Filing Season

Letter 1

Results in Brief 2

Background 4

Scope and Methodology 5

With Two Significant Exceptions, Processing of Returns and

Refunds Went Smoothly 7

Despite Various Efforts, IRS Did Not Achieve Its Electronic Filing

Goal for 2001 and Is Not on Track to Achieve Its Long-Range

Goal 13

Limited Progress in Providing World-Class Telephone Service 19

Fewer Taxpayers Visited Taxpayer Assistance Centers; Limited

Performance Data Indicate Continuing Problems With the

Quality of Assistance 22

Indicators Related to IRS’ Web Site Are Generally Positive, but the

Site Could Be More User-friendly 29

Conclusions 34

Recommendations for Executive Action 35

Agency Comments and Our Evaluation 36

Appendix I Problems IRS Experienced in 2001 Related to

Processing 39

TeleFile 39

Debt Indicator Database 39

Printing of Notices 40

Appendix II IRS Efforts to Encourage Electronic Filing

and Enhance Returns Processing in 2001 41

IRS Continued to Expand Electronic Filing Options, but

Evaluations of Effectiveness Have Been Limited 41

IRS Implemented Several Processing Initiatives, But Problems

Arose and Evaluations Were Limited 43

Appendix III TAC Managers’ Views on Their Sites’ Filing Season

Performance 50

Most TAC Managers Viewed Their Sites’ Filing Season as

Successful or Very Successful 50

Most Managers Cited Factors That Hampered Their Sites’ Success 54

Contents
Page ii GAO-02-144 IRS' 2001 Tax Filing Season

Appendix IV Comments From the Internal Revenue Service 58

Appendix V GAO Contacts and Staff Acknowledgments 66

GAO Contacts 66

Acknowledgments 66

Tables

Table 1: New and Revised Performance Measures for Processing

Paper Returns, Refunds, and Remittances 10

Table 2: Number of Individual Income Tax Returns Received, by

Filing Type 14

Table 3: Number of Individual Income Tax Returns Filed

Electronically Since 1995 15

Table 4: IRS Filing Season Telephone Assistance Performance 21

Table 5: Percentage Estimates of TAC Managers’ Views of Their

Sites’ Filing Season Success 51

Table 6: Percentage Estimates of TAC Managers’ Views on the

Extent to Which Certain Factors Hampered Their Sites’

Filing Season Success 55

Figures

Figure 1: Taxpayers Assisted at TACs During the Filing Season 22

Figure 2: Wait-Time Reported by Customer Satisfaction Survey

Respondents 27

Abbreviations

CERCA Council for Electronic Revenue Communication

ECN E-file customer number

ERO electronic return originator

IRS Internal Revenue Service

NCOA National Change of Address

PIN personal identification number

RRA 98 IRS Restructuring and Reform Act of 1998

SSN Social Security Number

TAC Taxpayer Assistance Center

TIGTA Treasury Inspector General for Tax Administration

TRR tax resolution representative
Page 1 GAO-02-144 IRS' 2001 Tax Filing Season

December 21, 2001

The Honorable Amo Houghton

Chairman, Subcommittee on Oversight

Committee on Ways and Means

House of Representatives

Dear Mr. Chairman:

In response to your request, this report discusses various aspects of the

Internal Revenue Service’s (IRS) performance during the 2001 tax filing

season. The filing season for most individual taxpayers extends from

January 1 through April 15. It is during that time when most taxpayers file

their returns, call IRS with questions, and make other contacts with IRS

related to filing. Because IRS’ activities during the filing season affect

every American taxpayer and because those activities will often be the

only contact most taxpayers have with IRS, breakdowns in IRS’

performance can have serious implications. The challenges presented by

the sheer scope of IRS’ filing season activities are exacerbated by the need

for IRS to keep pace with changing technology, organizational structures,

and taxpayer demands.

In this report, we assess IRS’ performance in five key filing season

activities:

• processing individual income tax returns and refunds,

• increasing the extent to which individual income tax returns are filed

electronically,

• answering telephone calls and providing quality telephone service,

• providing accurate and timely face-to-face assistance at its Taxpayer

Assistance Centers (TAC)1

, and

• providing services via its Web site on the Internet.

We testified before this Subcommittee on the interim results of our

assessment in April 2001.2

 1

IRS’ Taxpayer Assistance Centers were previously referred to as “walk-in sites.”

2

Internal Revenue Service: 2001 Tax Filing Season, Systems Modernization, and

Security of Electronic Filing (GAO-01-595T, Apr. 3, 2001).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-144 IRS' 2001 Tax Filing Season

Our assessment was based on interviews of IRS officials and persons in

the private sector, analyses of IRS data and data obtained from sources

outside IRS, observations of IRS operations, and a telephone survey of a

random sample of TAC managers.

Because of the importance of IRS’ telephone operations and of

performance data and measures in assessing IRS’ filing season, we

conducted more detailed reviews of those issues. We issued a separate

report on telephone operations on December 7, 2001,3

 and anticipate

issuing a separate report on IRS’ performance measures in April 2002.

IRS’ performance during the 2001 filing season varied depending on the

specific filing season activity being discussed.

Processing of Returns and Refunds—Although there was less

information available on which to base a judgment than in past filing

seasons, IRS’ processing of about 130 million individual income tax

returns and about 94 million refunds in 2001 generally went smoothly.

With the following two exceptions, problems that arose were addressed

quickly, with relatively minor impact on taxpayers.

• A bank that was under contract to collect tax returns and process tax

remittances for IRS destroyed or failed to process returns and about

71,000 payments amounting to about $1.2 billion.

• Problems that caused many electronic submissions to be rejected limited

the impact of an alternative signature program that IRS developed to

encourage more electronic filing.

Our assessment of IRS’ performance in processing returns and refunds is

based on interviews of IRS officials, information from representatives of

the tax practitioner community, an analysis by the Treasury Inspector

General for Tax Administration (TIGTA), and reported results of some

performance measures and workload indicators. Unlike past years, we

were unable to compare IRS’ processing performance against its

performance in prior years or its goals for the current year because IRS

revised the suite of measures it uses to judge processing performance and

had not yet set goals against which performance could be compared. IRS

 3

IRS Telephone Assistance: Limited Progress and Missed Opportunities to Analyze

Performance in the 2001 Filing Season (GAO-02-212, Dec. 7, 2001).

Results in Brief
Page 3 GAO-02-144 IRS' 2001 Tax Filing Season

also implemented several processing initiatives for 2001. It experienced

some problems during implementation, and its evaluations of the

initiatives were limited. More thorough evaluations would provide a better

basis for deciding whether to continue, curtail, or revise the initiatives.

Electronic Filing—About 31 percent of all individual income tax returns

were filed electronically in 2001—an increase of 13.7 percent compared to

2000. That rate of increase was below IRS’ goal of 20 percent and the

lowest percentage increase since 1996. This declining growth rate

occurred despite various IRS efforts to identify and eliminate impediments

to electronic filing and reduces the likelihood that IRS will achieve its

long-range goal of having 80 percent of individual income tax returns filed

electronically by 2007. Although IRS has taken various steps to identify

impediments to electronic filing and has identified several such

impediments, it does not have sufficient information to determine

specifically why about 40 million individual income tax returns were

prepared on computer but filed on paper in 2001.

Telephone Service—IRS made limited progress toward its long-term goal

of providing world-class telephone service. IRS has several measures

directed at assessing the ability of taxpayers to reach an IRS assistor by

telephone (accessibility) and the accuracy of IRS’ responses to callers. IRS

improved its performance to varying degrees in three of the four

accessibility measures. However, taxpayers waited longer for service in

2001 compared to 2000, and IRS failed to meet any of its accessibility goals

for 2001. With respect to accuracy, IRS met or exceeded two of its four

goals for 2001 and did significantly better in one area (account quality)

compared to 2000.

Face-to-Face Assistance—The number of taxpayers assisted at TACs

declined in 2001, in part, IRS officials surmised, because taxpayers made

greater use of other forms of assistance, including IRS’ Web site. Most

taxpayers who visited a TAC during the 2001 filing season waited 15

minutes or less to get assistance. IRS did not measure the quality of

service provided by TACs during the filing season, but a review by TIGTA

showed that the accuracy of tax law assistance was poor. IRS plans to

begin measuring TAC service quality in 2002. As a result, IRS may not

realize improvements in quality until the 2003 filing season or later, after it

has had time to analyze the results of the new measures and determine the

causes of any poor service. Contrary to TIGTA’s results and despite IRS’

lack of relevant performance data, managers responsible for most TACs, in

response to our survey, rated their sites’ performance in providing

accurate tax law assistance as “successful” or “very successful.” Many
Page 4 GAO-02-144 IRS' 2001 Tax Filing Season

managers, however, said problems with such things as facilities, staffing,

equipment, and training hampered performance in 2001.

Web Site—Various indicators related to IRS’ Web site show that (1)

overall usage increased compared to the 2000 filing season; (2) IRS

improved its timeliness in answering taxpayers’ E-mail questions; and (3)

the Web site’s availability and average delivery time, as measured by an

independent Web site rater, improved late in the filing season after a slow

start.4

 Our assessment of the Web site showed that (1) a key IRS measure

for tracking site usage—number of “hits”—is calculated in a way that calls

into question the measure’s usefulness and (2) the site is useable, but

could be more user-friendly. For example, we found 10 instances where

links within the site forwarded us to pages indicating that the document or

site could not be found. IRS is in the process of revising the content and

management of its Web site—changes that should address the problems

we identified.

We are making recommendations to the Commissioner of Internal

Revenue directed at (1) obtaining information on why computer-prepared

returns are filed on paper, (2) evaluating processing initiatives, (3)

improving TAC services, and (4) discontinuing or revising the Web site hits

measure. In commenting on a draft of this report, the Commissioner cited

various IRS plans that, in general, appear responsive to our

recommendations. We will be assessing IRS’ implementation of those

plans as part of our review of the 2002 tax filing season.

The IRS Restructuring and Reform Act of 1998 (RRA 98)5

 required, in part,

that the Commissioner of Internal Revenue develop and implement a plan

to reorganize IRS and that the plan, among other things, (1) eliminate or

substantially modify IRS’ existing organization, which was based on a

national, regional, and district structure and (2) establish organizational

units serving particular groups of taxpayers with similar needs. Before the

passage of RRA 98, IRS’ organizational structure had not significantly

changed for about 50 years. In accordance with RRA 98, IRS initiated a

major reorganization to streamline its management structure and create a

 4

Availability is the percentage of time the Web site’s home page downloads fully. Average

delivery time is the time it takes for the home page to fully download from the time the

user hits the “enter” key on the keyboard.

5

P.L. 105-206.

Background
Page 5 GAO-02-144 IRS' 2001 Tax Filing Season

more taxpayer-focused organization centered around four customerfocused operating divisions.6

 The responsibilities of one of those divisions

(the Wage and Investment Division) include processing individual income

tax returns and providing assistance to taxpayers who call on the

telephone or walk into an IRS office.

The 2001 filing season was the first under the new IRS organization. In

May 2001, the Commissioner of Internal Revenue testified that although

IRS had made substantial progress in implementing the new organizational

structure, many challenges remained as the organization was staffed and

trained. Although IRS reported that tens of thousands of IRS managers and

employees have new jobs, for example, in the field assistance area, it

anticipated that, in the short term, the reorganization would be invisible to

taxpayers and tax practitioners.

In response to the requirements of the Government Performance and

Results Act of 19937

 and RRA 98, IRS established a system of balanced

performance measures that would allow IRS to determine its performance

against program plans and goals.8

 This is part of an agencywide effort to

develop performance measures to help IRS achieve its mission of

providing America’s taxpayers with top quality service. Throughout the

2001 filing season, IRS made changes to the measures it uses to assess its

performance in various areas, particularly in processing returns and

refunds.

In response to your request that we assess various aspects of IRS’ tax

filing season performance, we

 6

The four operating divisions are Wage and Investment, which serves taxpayers whose only

income is from wages and investments; Small Business and Self-Employed, which serves

fully or partially self-employed individuals as well as businesses with assets of $5 million or

less; Large and Mid-Size Businesses, which serves businesses with assets over $5 million;

and Tax Exempt and Government Entities, which serves pension plans, exempt

organizations, and governments.

7

P.L. 103-62.

8

IRS’ balanced measures system has three components—customer satisfaction, employee

satisfaction, and business results. Business results performance measures consist primarily

of quantity and quality measures. IRS also uses workload indicators, such as number of

returns processed, for purposes of resource planning.

Scope and

Methodology
Page 6 GAO-02-144 IRS' 2001 Tax Filing Season

• interviewed IRS officials about current operations, initiatives, and

performance;

• observed operations at 2 of IRS’ 10 submission processing centers;

• reviewed and analyzed IRS documents and data, including information

posted to IRS’ Web site and related material;

• interviewed representatives of various private organizations that prepare

tax returns and that participated in conferences and tax forums sponsored

by IRS and external stakeholders; and

• reviewed related congressional testimony and work performed by TIGTA.

We also surveyed, by telephone, a random sample of managers responsible

for 84 of IRS’ 413 TACs to solicit their views on the services provided at

those offices. We randomly selected a sample of 84 TACs from a listing of

TACs provided by IRS, which excluded nontraditional sites, such as

mobile vans or kiosks. We conducted separate interviews for each of the

84 TACs, even if the same manager was responsible for more than 1 of the

TACs. All percentage estimates from our sample of managers have

sampling errors of plus or minus 10 percentage points or less, with 95

percent confidence unless otherwise noted. We also observed operations

at three TACs.

We conducted our work at IRS’ National Office; Wage and Investment

Division headquarters in Atlanta; submission processing centers in Atlanta

and Cincinnati; the Joint Operations Center in Atlanta;9

 and TACs in the

Atlanta area. We selected these offices for a variety of reasons, including

the proximity of our audit teams and the location of key IRS managers.

While we did not independently assess the accuracy of IRS’ performance

data, we verified that IRS had procedures in place that were intended to

ensure data reliability. We did our work from January through October

2001, in accordance with generally accepted government auditing

standards.

 9

 The Joint Operations Center is the organization responsible for managing IRS’ telephone

operations.
Page 7 GAO-02-144 IRS' 2001 Tax Filing Season

Generally speaking, the processing of individual income tax returns and

refunds in 2001 went smoothly. However, because IRS was replacing or

revising many performance measures, it is difficult to put IRS’

performance in 2001 into context. Specifically, for important areas of

performance, we could not make comparisons to IRS’ accomplishments in

2000 or to its goals for 2001.

Given the size and scope of IRS’ processing operations, problems are

inevitable, and there were some problems in 2001. However, with two

exceptions, those problems were addressed quickly, with relatively minor

impact on taxpayers. IRS also implemented several initiatives related to

the processing of individual income tax returns in 2001. IRS experienced

problems in implementing some of the initiatives, and evaluations of the

initiatives’ effectiveness were limited.

IRS processed about 130 million individual income tax returns and issued

about 94 million individual income tax refunds in 2001—about 2 million

more returns and 2.4 million more refunds than in 2000. According to IRS

officials, TIGTA, and representatives of the tax practitioner community,

IRS did a good job processing those returns and refunds, especially

considering the simultaneous challenge of reorganization. For example:

• in a September 2001 report, TIGTA concluded that IRS had successfully

processed individual income tax returns during the 2001 filing season

while undergoing organizational restructuring and implementing key

processing changes;10

• in testimony before this Subcommittee, one of the largest tax return

preparation firms characterized the filing season as successful and

positive; and

• representatives from other, smaller companies with whom we spoke

voiced similar views.

The one negative aspect mentioned by some practitioners was the

alternative signature program for electronic filers, which is discussed

later.

 10The Internal Revenue Service Successfully Processed Individual Tax Returns During

the 2001 Filing Season, TIGTA, Reference No. 2001-40-192, Sept. 28, 2001.

With Two Significant

Exceptions,

Processing of Returns

and Refunds Went

Smoothly

IRS’ Processing During the

2001 Filing Season

Generally Went Smoothly
Page 8 GAO-02-144 IRS' 2001 Tax Filing Season

Not unexpectedly, some processing problems did arise during the filing

season involving such things as incorrect addresses on and information in

certain tax packages, incorrect information given to providers of Refund

Anticipation Loans,11 and untimely notices. As discussed in appendix I,

available information indicated that IRS handled these problems in a

timely manner to limit any adverse effect on taxpayers. Two problems that

did adversely affect many taxpayers involved a bank that was under

contract to collect tax returns and process tax remittances for IRS and an

alternative signature program that IRS had developed to encourage more

electronic filing. The bank problem is discussed next. The alternative

signature program is discussed in a later section of this report dealing with

electronic filing.

IRS uses lockboxes, operated by private banks, to process some tax

payments submitted with individual income tax returns. Lockboxes are to

receive tax returns and accompanying payments from taxpayers, process

the payments, and ship the returns to IRS for processing. During the 2001

filing season, IRS learned that some returns and remittances that were to

be processed by a lockbox operated by a Pittsburgh bank were missing.

According to information available when we finalized this report,

employees at that lockbox may have concealed or destroyed about 71,000

payments amounting to about $1.2 billion. The bank’s contract was

terminated in August 2001. At the time we completed our audit work,

TIGTA was investigating this matter. That investigation should provide

more specific information on the number of returns and dollar amount of

remittances affected.

According to IRS, during the first week of June 2001, after it became aware

of this situation, it released to the press and public, information about the

missing documents, which included a toll-free telephone number for

taxpayers to call for assistance. In that regard, a June 9, 2001, article in the

Pittsburg Post-Gazette noted that IRS had found 647 payments that had

never been processed in Pittsburgh. According to IRS, once it learned that

a larger number of taxpayers were affected, it posted an alert on its Web

site on August 31, 2001.

 11Private firms offer Refund Anticipation Loans to taxpayers who file electronically. The

loan amount is based on the amount of the taxpayer’s expected refund, and the refund is

sent directly to the loan provider to pay off the loan.

Returns and Remittances

Destroyed or Not Processed by

Contractor
Page 9 GAO-02-144 IRS' 2001 Tax Filing Season

Because it was unclear whether IRS would locate the missing documents,

IRS advised affected taxpayers to send another copy of their return. It also

advised taxpayers who had sent remittances to Pittsburgh that had not yet

cleared their banks to stop payment and said that it would reimburse

taxpayers for any bank fees incurred for the stop-payment orders.

As part of its agencywide efforts to develop balanced performance

measures, IRS has revised some measures and developed new ones to

judge its performance in processing paper returns, refunds, and

remittances, while keeping comparable workload indicators, such as the

numbers of returns processed and the time it takes to process returns.12 In

past years, our assessment of IRS’ performance in processing paper

returns and refunds included a comparison of various performance

measures against IRS’ goals and prior years’ performance. We were unable

to make such a comparison for measures this year because IRS (1) revised

some measures that it had been using to assess processing performance

and established some new measures and (2) had not established goals for

the new or revised measures in 2001.

Table 1 describes the performance measures for processing individual

income tax returns, refunds, and remittances that were in place during the

2001 filing season and shows the performance results IRS reported for

each of those measures through July 2001. IRS officials agreed with our

assessment that it is difficult to put the reported results into context

because of the absence of performance goals and trend data. However,

according to IRS officials, while they understand the importance of such

information, they also rely heavily on workload indicators and other

management information they have used for years to identify and correct

problems that could affect processing and other activities and help judge

IRS’ overall filing season success.

 12This section deals only with paper processing performance measures. Any relevant

electronic filing measures will be discussed in the electronic filing section of this report.

New and Revised

Performance Measures for

Paper Processing Limit

Ability for Comparison
Page 10 GAO-02-144 IRS' 2001 Tax Filing Season

Table 1: New and Revised Performance Measures for Processing Paper Returns, Refunds, and Remittances

Measure Description New or revised Baseline yeara

Performance through

July 2001

Letter error rate Percentage of incorrect letters issued by the

submission processing organization.

New 2001 12.7%

Notice error rate Percentage of submission processing

notices issued incorrectly to taxpayers that

are automatically generated for various

reasons, including advising taxpayers of

missing Social Security numbers (SSN). Not

all notices are automatically generated;

some for which a standard notice would not

apply are generated manually.

Revised to include

systemic errorsb

 and

only submission

processing notices.

2002 13.8%

Deposit error rate Percentage of payments processed by IRS

centers that were misapplied (excludes

lockboxes).

New 2001 5.4%

Deposit timeliness The lost opportunity cost of interest on the

money received but not deposited by the

next business day, per $1 billion, using a

constant interest rate of 8 percent. (Excludes

money received by lockboxes.)

New 2001 $824,154

Refund timeliness Percentage of refunds issued in 40 days or

less from the IRS-received date.

Revised the start

date for determining

calculation.

2002 96.6%

Refund error rate Percentage of refunds with IRS-caused

errors in the name, address, or refund

amount, including systemic errors.

Revised to include

systemic errors.

2001 9.8%

Refund interest

paid

Amount of refund interest paid for each $1

million in refunds issued.

New 2001 $118.92

Productivity Weighted volume for different types of

processing work per staff year expended.

New 2001 27,807

a

IRS intended to use its performance in 2001 as the baseline against which to compare its

performance in future years. However, IRS made changes to two measures (notice error rate and

refund timeliness) that will result in it not establishing some baselines until 2002.

b

Systemic errors are computer generated errors over which a particular processing center would not

have control.

Source: GAO summary of IRS data including the Wage and Investment Division’s Strategy and

Program Plan for 2001 to 2003, dated Sept. 21, 2001.

During the 2001 filing season, IRS made changes to many of the measures

in table 1. Some of the changes, such as renaming a measure and inverting

its calculation, should not affect IRS’ ability to begin trending data from

the 2001 filing season.13 However, IRS made more substantial changes to

 13Where once IRS had a notice accuracy rate measure that was the percentage of correct

notices issued, for example, it now has a notice error rate measure that is the percentage of

incorrect notices issued.
Page 11 GAO-02-144 IRS' 2001 Tax Filing Season

two measures—notice error rate and refund timeliness—that limited IRS’

ability to baseline those measures until the 2002 filing season.

IRS mails millions of notices to advise taxpayers of such things as math

errors. IRS reviews samples of these notices before they are mailed to

ensure that they are accurate. For 2001, IRS redesigned six submission

processing notices in an attempt to make them clearer. Due to a

programming oversight, IRS inadvertently omitted the redesigned notices

from the sampling it does to measure the notice error rate. Therefore, the

measure was not representative of the errors for all submission processing

notices. Omitting these particular notices was significant because they are

some of the most commonly used notices. IRS officials said that necessary

programming changes were made in June 2001, so that the sampling and

resulting measure will be reflective of all submission processing notices

for the 2002 filing season.

About 72 percent of the individual income tax returns processed by IRS in

2001 involved refunds totaling about $161 billion. IRS changed the way it

measures the timeliness of issuing refunds to taxpayers who filed on

paper. Before 2001, IRS used the date the taxpayer signed the return as the

start date for computing refund timeliness and had a goal of processing a

certain percentage of those refunds within 40 days from that date. For the

2001 filing season, IRS used the IRS-received date as the start date for

computing timeliness because it had no control over the date the taxpayer

put on the return, but did have control over its own operations. As we

reported in our April 2001 testimony, while we agreed with the new start

date, keeping the goal at 40 days effectively gave IRS a better chance of

meeting the 40-day goal because the IRS-received date could be several

days later than the date the taxpayer signed the return.

For the 2002 filing season, IRS plans to change the computation by adding

2 days to the IRS-received date to allow for mailing time, but keep the

overall goal at 40 days. We believe that this represents a change in the

methodology used to calculate the measure that will make it impossible to

compare the results for 2001 with the results for 2002. IRS officials

disagreed. Because the overall goal of 40 days has not changed, they

believe the results will be comparable.

As noted previously, we anticipate issuing an assessment in April 2002 of

IRS’ new performance measures, including measures discussed in this

report.

Notice Error Rate

Refund Timeliness
Page 12 GAO-02-144 IRS' 2001 Tax Filing Season

IRS implemented several initiatives related to its processing of returns that

were intended to either improve processing operations or enhance

compliance. IRS validated secondary SSNs,14 added a checkbox to the

individual income tax forms through which taxpayers could authorize IRS

to discuss their return with their paid practitioner instead of having to

submit a separate authorization form, transcribed information from

Schedule K-1s,15 and began using a U.S. Postal Service database to update

taxpayer addresses. These initiatives may have obvious or inherent

benefits beyond improving performance, such as increasing compliance,

and it may take years until the benefits are fully achieved. However, in

some cases, IRS experienced problems that limited the effectiveness of

these initiatives. For example, despite concerted efforts, IRS experienced

problems in processing Schedule K-1s—problems that contributed to

lower than anticipated productivity rates.

Also, despite the demonstrated benefits of evaluating initiatives that are

aimed at improving performance16 and the presence of IRS guidance

requiring that plans for improving performance include steps to monitor

and evaluate the implementation and effectiveness of actions, IRS’

evaluations of such initiatives were limited. IRS officials generally drew

conclusions about the effectiveness of initiatives based on broad numbers

and trends. For example, a responsible IRS official considered the thirdparty-authorization checkbox to be very successful because about 28

million taxpayers checked the box. IRS officials assumed that the number

of people who checked the box directly equated to a reduction in the

number of separate authorization forms it would have received from those

taxpayers, but it lacked detailed analysis to support this assumption. Also,

IRS had no system in place for tracking how use of the third-party-

 14The Social Security Administration assigns SSNs that IRS uses to identify individual

taxpayers. In the case of a joint return, IRS considers the person whose name appears first

on the return to be the primary taxpayer and the next person listed on the return to be the

secondary taxpayer.

15Schedule K-1s are attached to returns filed by partnerships, trusts, and subchapter S

corporations. A K-1 is prepared for each taxpayer who received a distribution from the

organization, and the receiving taxpayers are to report that income on their individual

income tax returns.

16Our work on the Government Performance and Results Act of 1993 has demonstrated the

benefits of evaluating the effectiveness of actions taken to improve performance. See

Program Evaluation: Studies Helped Agencies Measure or Explain Program

Performance (GAO/GGD-00-204, Sept. 29, 2000) and Program Evaluation: Agencies

Challenged by New Demand for Information on Program Results (GAO/GGD-98-53, Apr.

24, 1998).

IRS Implemented

Processing Initiatives but

Had Some Problems and

Did Limited Evaluation
Page 13 GAO-02-144 IRS' 2001 Tax Filing Season

authorization checkbox facilitated the resolution of issues related to a

return’s processing.

IRS officials said that although initiatives may not be specifically evaluated

for effectiveness, they are evaluated for resource planning and other

purposes as part of filing season readiness reviews and the development of

action plans to prepare for the next filing season. While we are aware of

this fact, we are unconvinced that evaluations as part of filing season

readiness reviews would be sufficient for determining effectiveness.

See appendix II for a more detailed discussion of these processing

initiatives.

For the first time since 1995, IRS did not achieve its anticipated rate of

growth for the electronic filing of individual income tax returns and, as a

result, fell short of its goal for the 2001 filing season. This reduces the

likelihood of IRS achieving its long-range electronic filing goal of 80

percent by 2007.17 Because electronic filing is beneficial to IRS and

taxpayers,18 IRS has taken numerous actions to identify impediments to

electronic filing. One group of potential electronic filers that IRS does not

know enough about are the large number of practitioners and taxpayers

who prepare tax returns on computer but file on paper. IRS took steps to

encourage more taxpayers and practitioners to file electronically in 2001.

However, the most significant of those actions, implementation of a selfselect personal identification number (PIN) program for signing electronic

returns, encountered problems that limited its effectiveness.

 17RRA 98 provides, in part, that it should be the goal of IRS to have at least 80 percent of all

federal tax and information returns filed electronically by 2007. IRS’ goal for individual

income tax returns is consistent with this overall goal—80 percent by 2007.

18Electronic filing is beneficial to IRS and taxpayers because it ensures a more accurate tax

return and thus reduces the need for correspondence between them. Accuracy is enhanced

because (1) checks are built into the electronic filing process that are designed to catch

certain taxpayer errors, such as incorrect SSNs, so that they can be corrected before IRS

takes possession of the tax return, and (2) returns filed electronically bypass the more

error-prone manual procedures that IRS uses to process paper returns. Electronic filing has

other benefits as well. For example, taxpayers receive their refunds faster and get an

acknowledgement from IRS that their returns were received, and IRS has less paper to

store.

Despite Various

Efforts, IRS Did Not

Achieve Its Electronic

Filing Goal for 2001

and Is Not on Track to

Achieve Its LongRange Goal
Page 14 GAO-02-144 IRS' 2001 Tax Filing Season

IRS has the following three types of electronic filing: (1) traditional,

whereby taxpayers transmit returns to IRS through a third party (such as a

tax return practitioner); (2) TeleFile, whereby taxpayers send returns

directly to IRS over telephone lines using a Touch-Tone telephone; and (3)

on-line, whereby taxpayers send returns to IRS through an on-line

intermediary using a personal computer and commercial software. As

shown in table 2, the use of traditional filing and on-line filing increased in

2001, but not as substantially as they had in 2000, while the use of TeleFile

continued to decrease (this was the third consecutive year). Table 2 also

shows that about 30.9 percent of the individual income tax returns filed in

2001 were filed electronically.

Table 2: Number of Individual Income Tax Returns Received, by Filing Type

Number of returns in thousands

Filing type 1/1/99 to 10/29/99 1/1/00 to 10/27/00

Percentage

change 1999

to 2000 1/1/01 to 10/26/01

Percentage

change 2000

to 2001

Paper 96,178 92,322 -4.01 89,834 -2.69

Electronic

Traditional 21,227 25,211 18.77 28,988 14.98

TeleFile 5,665 5,161 -8.90 4,419 -14.38

On-line 2,457 5,022 104.40 6,838 36.16

Subtotal 29,349 35,394 20.60 40,245 13.71

Total 125,527 127,716 1.74 130,079 1.85

Percentage filed

electronically

 23.4 27.7 a30.9 a

a

Not applicable

Source: IRS’ Management Information System for Top Level Executives.

Table 3 shows that the upward growth in electronic filing depicted in table

2 continues the upward trend started in 1995. However, table 3 also shows

that the percentage increase between 2000 and 2001 was smaller than at

any other time during this period.

Electronic Filing Growth

Rate Has Slowed; IRS at

Risk of Not Achieving

Long-Range Goal
Page 15 GAO-02-144 IRS' 2001 Tax Filing Season

Table 3: Number of Individual Income Tax Returns Filed Electronically Since 1995

Number of returns in thousands

Year

Number of

electronic returns Increase

Percentage

increase

1995 11,807 a a

1996 14,968 3,161 26.8

1997 19,136 4,168 27.8

1998 24,580 5,444 28.4

1999 29,349 4,769 19.4

2000 35,394 6,045 20.6

2001 40,245 4,851 13.7

Cumulative increase 28,438 240.9

a

Not applicable.

Source: IRS’ Management Information System for Top Level Executives and IRS Publication 3187

(Rev. 11-1999).

As shown in table 3, the rate of growth for electronic filing slowed to 13.7

percent in 2001, which was about 6 percentage points less than the 20

percent growth IRS had projected. As a result, IRS did not meet its goal of

receiving 42 million returns electronically in 2001 and, as of September

2001, had lowered its projected rate of growth for 2002 to about 13 to 15

percent.

The decreasing growth rate puts at risk IRS’ chances of reaching its long–

range goal of 80 percent electronic filing by 2007. Assuming continuing

annual growth rates of 13.7 percent for individual returns filed

electronically and 1.85 percent for the total number of individual returns

filed, about 60 percent of all individual income tax returns will be filed

electronically in 2007.

IRS officials did not know why IRS fell short of the projected 20 percent

increase in electronic filing in 2001. However, in 2001, as in other years,

IRS took various steps to identify reasons why practitioners and taxpayers

do not file electronically. These steps include electronic filing forums,

meetings of the Council for Electronic Revenue Communication

Advancement (CERCA), taxpayer attitudinal surveys, customer

satisfaction surveys, market research, focus groups, and practitioner

meetings.

Although IRS has taken numerous steps to identify impediments to

electronic filing, our review of recent IRS research efforts and our

IRS Has Taken Steps to

Identify Impediments to

Electronic Filing, but It

Has Inadequate

Information on Why Many

Computer-Prepared

Returns Are Filed on Paper
Page 16 GAO-02-144 IRS' 2001 Tax Filing Season

attendance at IRS tax forums indicated that IRS does not have sufficient

information to determine why about 40 million individual income tax

returns were prepared on computer but filed on paper in 2001. Of those

returns, about 32 million were filed by tax return practitioners and about 8

million were filed by taxpayers. Converting these filers to electronic is

important if IRS is to achieve its 80 percent electronic filing goal. That

importance was underscored in an internal IRS research report dated May

16, 2001. According to the report, without a successful marketing plan

designed to convert filers of computer-prepared paper returns to

electronic, “it is difficult to see how the Service can attain its 80 percent

electronic filing mandate.”

IRS’ various research efforts have resulted in limited direct contact with

the filers of computer-prepared paper returns. The tax forums that we

attended were generally attended by practitioners who were already

involved in electronic filing or already interested in becoming electronic

filers. Two recent research efforts involving focus groups involved about

90 filers of computer-prepared paper returns. One research effort

completed in May 2001 by a private marketing and research firm involved

18 in-depth interviews with 3 tax preparation firms that electronically file,

4 large accounting firms, and 11 organizations that represent tax

practitioners. In its report, the firm identified many knowledge gaps,

including why computer-prepared forms are filed on paper. The most

recent research study was done by the same firm and completed in June

2001. The firm contacted practitioners who had filed at least 1 tax return

electronically and a sample of the general taxpayer population, which

included 70 taxpayers who filed computer-prepared paper returns in 2001.

None of these research efforts was specifically targeted at determining

what specific factors were most significant in explaining why so many

computer-prepared returns are filed on paper.

In past years, IRS took steps to encourage taxpayers and practitioners to

file electronically. For example, in response to concerns voiced by

practitioners that electronic filing was not entirely paperless, IRS, during

the 1999 and 2000 filing seasons, tested alternative signature options that

allowed certain electronic filers to sign their returns electronically and

thus avoid having to send any paper to IRS. Additionally, each year IRS has

expanded the list of forms and schedules that can be filed electronically.

For the 2001 filing season, IRS expanded on its prior years’ efforts and

took some additional actions. A discussion of the most significant and

most problematic of those actions—the self-select PIN program—follows.

Other actions are discussed in appendix II.

IRS Took Steps to

Encourage More

Electronic Filing in 2001,

but the Most Significant

Step Encountered

Problems
Page 17 GAO-02-144 IRS' 2001 Tax Filing Season

For the 2001 filing season, IRS introduced the self-select PIN program to

replace two alternative signature programs that IRS had tested during the

1999 and 2000 filing seasons—the practitioner PIN program and the E-file

customer number (ECN) program. Taxpayers who decided to use the selfselect PIN were to (1) input any five numbers as their electronic signature

and (2) verify their identity by providing IRS with certain personal

information, including two pieces of information (known as “shared

secrets”) from their previous year’s tax return.

The following are three major differences between the self-select PIN

program and the two alternative signature programs tested in 1999 and

2000.

• The self–select PIN program significantly increased the number of

taxpayers who could file a totally paperless tax return.19 Under this

program, all eligible taxpayers who filed on-line or through any of the

about 124,000 approved electronic return originators (EROs)—a total of

about 60 million taxpayers, according to IRS—could file a totally paperless

return.20 That level of eligibility compares to the 2000 filing season when

the only persons who could file a totally paperless return were (1)

taxpayers who filed through 1 of the 18,000 EROs who participated in the

practitioner PIN program or (2) the 12 million potential on-line filers who

received an ECN.

• Practitioners using the self-select PIN did not have to fill out and maintain

an authentication worksheet, unlike with the practitioner PIN program.

• The self-select PIN program allowed all taxpayers to select their own PIN.

In contrast, on-line filers had to use an ECN assigned by IRS.

In 2001, about 9 million taxpayers filed their tax returns electronically,

either through a practitioner or on-line, using a self-select PIN. Although

this number is more than the about 6.8 million filers who used either the

practitioner PIN or ECN programs in 2000, the increase is due primarily to

on-line filers. In that regard, (1) about 2.9 million more on-line filers used a

self-select PIN in 2001 than participated in the ECN program in 2000 and

 19Taxpayers who file electronically and use the electronic signature option are not required

to submit a signature document or copies of their Wage and Tax Statements (Form W-2).

20Individuals who filed Form 1040, 1040A, or 1040EZ or who used TeleFile the previous

year, with a few exceptions, were eligible to use a self-select PIN in 2001. Also eligible were

individuals who did not file a tax return in the previous year and would be 16 or older by

December 31, 2001.

Self-select PIN Program

Intended to Encourage More

Electronic Filing

Self-select PIN Program

Encountered Problems
Page 18 GAO-02-144 IRS' 2001 Tax Filing Season

(2) about 4.8 million practitioner-prepared tax returns were filed in 2001

using a self-select PIN—about 600,000 fewer than the 5.4 million tax

returns that were submitted via the practitioner PIN program in 2000. The

decline in practitioner-prepared returns occurred in spite of the fact that

many more practitioners were eligible to participate in the self-select PIN

program than were eligible to participate in the practitioner PIN program.

One key factor that limited the number of participants in the self-select

PIN program was the fact that at least some tax practitioners became

disenchanted with the program because a large number of returns being

submitted with self-select PINs were being rejected by IRS. In that regard

• IRS records, as of October 16, 2001, showed about 2.1 million reject

conditions on returns filed electronically because some of the “shared

secrets” that taxpayers and practitioners submitted to verify the taxpayer’s

identity did not match tax information in IRS’ database;21 and

• representatives of the country’s largest tax return preparation company

testified on April 3, 2001, that the company was experiencing a reject rate

of about 20 percent during the 2001 filing season compared to a normal

electronic filing reject rate of 12 to 13 percent, with almost all of the

difference attributed to rejected PINs.

According to IRS, the large number of rejects associated with the selfselect PIN program were caused not by systemic problems with IRS’

program but by incorrect information provided by taxpayers or

practitioners.

Because of the reject rates, the company recommended that members of

its organization who prepared returns and taxpayers who used the

company’s software package to prepare their own returns not use the selfselect PIN. In their April 3 testimony, representatives of this company said

the following:

“This year, thousands of PIN applications submitted with correct “shared secrets”

information were rejected, costing tax professionals time and income as they worked to

correct the rejects, and angering many customers who anticipated easier filing and faster

refunds. Some preparers abandoned the program as it became easier to use the paper

 21The number of reject conditions cannot be equated to the number of rejected returns

because one return can have more than one reject condition.
Page 19 GAO-02-144 IRS' 2001 Tax Filing Season

[signature document] instead of having to deal with a PIN reject and asking the client to

return to file [a paper signature document].”

“The IRS believes the majority of PIN rejects are caused by customer error. But whether

the problem is with the practitioner, the taxpayer, or the IRS, one fact remains: If you [file

electronically] using a PIN, your return is more likely to be rejected.”

22

Practitioners who had problems with the self-select PIN testified before

the Congress and stated at tax forums and CERCA meetings that they still

filed electronically but, instead of using a PIN, sent IRS a paper signature

document. However, as noted earlier, at least one practitioner who

produces software for filing on-line advised users of its software not to use

the self-select PIN. Although neither we nor IRS know why about 20

percent fewer taxpayers than the 8.5 million IRS projected to file on-line

actually did so, it seems reasonable to assume that this advice discouraged

some potential on-line filers.

During a CERCA meeting that we attended in May 2001, CERCA members

told IRS that they would like to see the practitioner PIN program brought

back and the number of “shared secrets” for the self-select PIN program

reduced from two items to one, thus reducing the potential for rejection.

IRS said that it would make both of these changes for the 2002 filing

season.

One of the most widely used ways that IRS provides service to taxpayers is

via its toll-free telephone operations. In April 2001, we reported that IRS

had received about 61 million telephone calls during the 2000 filing season

and that the quality of service provided was mixed and below IRS’ longterm goal of providing world-class telephone service.23 During the 2001

filing season, IRS received about 71 million calls and made limited

progress towards its long-term goal.

IRS had eight measures to assess its performance in providing telephone

service during the 2001 filing season, four relating to accessibility and four

relating to accuracy.

 222001 Tax Return Filing Season, Hearings Before the Subcommittee on Oversight of the

Committee on Ways and Means, House of Representatives, 107 Cong. 80-81 (2001).

23IRS Telephone Assistance: Quality of Service Mixed in the 2000 Filing Season and

Below IRS’ Long-Term Goal (GAO-01-189, Apr. 6, 2001).

Limited Progress in

Providing World-Class

Telephone Service
Page 20 GAO-02-144 IRS' 2001 Tax Filing Season

“Assistor level of service” is designed to show IRS’ effectiveness in

providing callers access to an assistor.

“Assistor response level” reflects the percentage of taxpayers who

waited 30 seconds or less to speak with an assistor.

“Abandon rate” shows the percentage of taxpayers who hang up while

waiting to speak with an assistor.

“Average speed of answer” shows the average number of seconds

taxpayers wait to speak to an assistor.

“Tax law quality rate” and “account quality rate” show, for a

representative sample of calls, the percentage in which assistors follow all

procedures and provide correct answers.

“Tax law correct response rate” and “account correct response

rate” are intended to more accurately reflect the taxpayers’ experience in

obtaining correct information by discounting procedural errors and

measuring the percentage of calls in which IRS assistors provide correct

responses to inquiries.

As table 4 shows, IRS improved its performance to varying degrees in

three of the four accessibility measures, but fell short of its goals for all

four. The fourth measure showed a significant decrease in performance.

As for the accuracy of its telephone service, table 4 shows that IRS met or

exceeded two of its four goals for 2001 (tax law quality and account

quality) and did significantly better—10 percent better—in account quality

compared to 2000. 24

 24Accessibility measures are based on comparable data for the weeks beginning January 1

and ending July 14. Accuracy measures are based on data for the months of January

through June.
Page 21 GAO-02-144 IRS' 2001 Tax Filing Season

Table 4: IRS Filing Season Telephone Assistance Performance

2000 2001

Measurea Actual Actual Target

Accessibility

 Assistor level of service 60% 61% 69%

 Assistor response level 39 41 49

 Abandon rate 22 18 12

 Average speed of answer 237 seconds 273 seconds 132 seconds

Accuracy

 Tax law quality rate 73% +/- 2%b75% +/- 1%b74%

 Account quality rate 59 +/- 2%b69 +/- 1%b63

 Tax law correct response

rate

c

79 +/- 1%b82

 Account correct response

rate

c 88 +/- 1%b 91

a

Accessibility measures are based on actual counts. Accuracy measures are based on representative

samplings.

b

Actual values are estimates, with 90 percent confidence.

c

Comparable data do not exist.

Source: IRS data.

We conducted a separate review of IRS’ efforts to identify and address the

factors affecting its performance in providing toll-free telephone

assistance. We issued a report on the results of our review in December

2001.25

 25GAO-02-212, Dec. 7, 2001.
Page 22 GAO-02-144 IRS' 2001 Tax Filing Season

The number of taxpayers who were assisted at TACs during the 2001 filing

season declined about 11 percent compared to the 2000 filing season, with

a variety of factors contributing to the decline. As a result of

reorganization, IRS changed the way TACs were organized and staffed and

did considerable hiring, mostly from within, but maintained the same

network of about 400 TACs where taxpayers could walk in to obtain

forms, answers to tax law questions, and assistance in preparing their

returns. Also as a result of the reorganization, IRS deferred measuring or

improving quality in 2001. However, a TIGTA review in early 2001

indicated that the accuracy of tax law assistance provided by TACs—the

only type of service measured—was poor. Contrary to these findings,

managers responsible for most TACs rated their site’s performance

positively in our telephone survey.

The number of taxpayers assisted at TACs declined about 11 percent—

from 5.8 million contacts during the 2000 filing season to 5.1 million

contacts during the 2001 filing season, as shown in figure 1.

Figure 1: Taxpayers Assisted at TACs During the Filing Season

Note: The time periods covered by this figure each began on January 1 and ended on April 24, 1999,

April 22, 2000, and April 21, 2001.

Source: IRS data.

Our interviews of IRS officials identified the following factors that may

have contributed to the decline in the number of taxpayers assisted at

TACs.

Fewer Taxpayers

Visited Taxpayer

Assistance Centers;

Limited Performance

Data Indicate

Continuing Problems

With the Quality of

Assistance

Number of Taxpayers

Assisted at TACs Declined

6.1

0.7

5.8

0.9

5.1

0.8

0

1

2

3

4

5

6

7

Millions of 

Taxpayers

1999 2000 2001

Filing Season 

Total Walk-In Return Preparation

ss
Page 23 GAO-02-144 IRS' 2001 Tax Filing Season

• With the intent of reducing the need to rely on compliance staff to help

meet the demand for assistance at TACs, IRS limited eligibility for returnpreparation assistance—a very labor-intensive service—to taxpayers with

gross income of $41,000 or less26 and tried to even out its workload by

scheduling appointments for return-preparation assistance. These changes

likely contributed to a decrease in the number of filing season contacts for

return-preparation assistance from 894,729 in 2000 to 786,103 in 2001.

• There were fewer tax law changes applicable to returns filed in 2001 than

in the recent past.

• As discussed in more detail later, more taxpayers were looking to IRS’

Web site for assistance. For example, the number of forms and

publications downloaded from IRS’ Web site as of August 31, 2001, had

more than doubled—to about 279 million—compared to the same period

in 2000.

• IRS had directed TACs to “rigorously promote alternatives,” such as

volunteer sites that provide free return-preparation assistance. Although

these sites generally target their services toward certain groups of

taxpayers, such as low-income and elderly taxpayers, they generally do

not deny service based on income. According to data reported by

volunteer sites, their number increased from about 17,600 in 2000 to about

18,400 in 2001. The number of taxpayers who received assistance from

volunteer sites increased from about 3.3 million to about 3.6 million for the

same periods.

The field assistance organization underwent considerable change in 2001

although the number of TACs remained about the same as in 2000.

However, except for establishment of an income limit on returnpreparation assistance and the need to make appointments for this type of

assistance, these changes should have been largely transparent to

taxpayers during the 2001 filing season.

Before IRS’ reorganization, the TACs reported to 33 district offices.

According to IRS officials, differences in the way the former walk-in sites

were organized and operated within each district caused inconsistencies

in the assistance provided to taxpayers. To provide more consistency in

field assistance, the TACs now report to the Wage and Investment

Division’s Field Assistance Director, through a network of 7 area and 34

territory offices. According to field assistance officials, IRS began the year

 26According to IRS, this income limit will be lowered to $33,000 for 2002.

IRS Changed the Way

TACs Were Organized and

Staffed in 2001
Page 24 GAO-02-144 IRS' 2001 Tax Filing Season

with about 1,000 technical field assistance employees and had hired

another 504 as of March 16, 2001. Of those 1,504 technical employees,

1,041 were in a new position—tax resolution representative (TRR)—that

IRS established as part of its reorganization. As of September 30, 2001, the

number of technical employees had increased to 1,843, including 1,278 in

the new TRR position. IRS established the TRR position to help TACs meet

the demand for assistance during the filing season while reducing reliance

on IRS’ compliance functions, such as Examination and Collection.27

Although IRS filled the TRR positions primarily from qualified staff in

related job series, additional training was required. According to officials,

IRS surveyed the new staff to assess training gaps and prioritized the

delivery of abbreviated training to fill the gaps. However, not all of the

gaps were filled in time for the 2001 filing season. For example, about 100

staff placed in TRR positions in January 2001, who needed the full 6 weeks

of required first-year training, received only 3 weeks of that training.

Staffing the new field assistance management structure also required

considerable hiring and training. Managers of the former walk-in sites

were generally compliance staff who moved to the new Small Business

and Self-Employed Division. In addition to the new Director of Field

Assistance, the new management structure includes 7 area directors, 34

territory managers, and 226 group managers who are the first-line

managers responsible for the day-to-day operations of one or more TACs.

As of December 31, 2000, IRS had filled all 7 area director positions, 29 of

the territory manager positions, and 154 of the group manager positions (3

more territory manager position and 8 more group manager positions had

been filled by September 30, 2001). According to IRS officials, about onehalf of the new managers had no field assistance experience and some had

no managerial experience.28

 27Reducing the need for compliance staff to help provide assistance frees up those staff to

audit returns and collect tax debts. The number of compliance staff years used to provide

field assistance during the filing season decreased from 386 staff years in 2000 to 162 staff

years in 2001—a decrease of 58 percent. According to field assistance officials, the 386 staff

years for 2000 was understated by an unknown amount, because many compliance staff

reported their time under the compliance time reporting system rather than the one used

for field assistance.

28According to information provided by IRS in November 2001, the managers completed a

new course entitled Managing a Taxpayer Assistance Center, which was designed

especially for them.
Page 25 GAO-02-144 IRS' 2001 Tax Filing Season

Important measures of IRS’ performance in helping taxpayers who walk

into one of its TACs are the quality and timeliness of services provided.

Available quantitative information indicates that (1) the quality of tax law

assistance provided by TACs was poor, notwithstanding the more

optimistic views of TAC managers but (2) most taxpayers who visited a

TAC received timely assistance.

As discussed in our report on the 2000 filing season,29 IRS’ review of the

assistance provided to taxpayers who walked in with tax law questions

showed that accuracy was poor that year.30 In that review, IRS employees

posing as taxpayers made 544 visits to walk-in sites. In a report on the

results, IRS noted, among other things, that 92 percent of the “assistors

spoke to reviewers in a pleasant manner and tone of voice,” but 81 percent

of the reviewers’ questions were not answered correctly.31

Because of staffing and training challenges associated with the

reorganization, IRS did not measure or assess the quality of TAC service

during the 2001 filing season. However, a TIGTA review of tax law

assistance in early 2001 showed that accuracy was still poor. According to

TIGTA, its review involved 90 contacts at 47 TACs in which tax law

questions were posed to IRS representatives. In 7 of those 90 contacts, or 8

percent of the time, service was denied. In 41 of the remaining 83 cases, or

almost half the time, TIGTA reviewers received inaccurate answers.

Although TIGTA’s results might indicate that the accuracy of tax law

assistance provided by TACs, while still poor, had improved compared to

the results of IRS’ reviews in 2000, such a comparison cannot be made

because TIGTA used a different methodology from the one used by IRS.

In contrast to TIGTA’s results, we estimate, based on our random sample,

that the vast majority of field assistance group managers would have

spoken positively about the accuracy of their sites’ tax law assistance

during the 2001 filing season. We estimate that managers responsible for

 29Tax Administration: Assessment of IRS’ 2000 Tax Filing Season (GAO-01-158, Dec. 22,

2000).

30Although TACs provide various services, IRS only assessed the quality of tax law

assistance.

31About one fourth of the 81 percent (22 percent of the reviewers’ questions) were

instances in which assistors were, in effect, denied service because their questions were

not answered. For example, reviewers were sometimes told to take a form or publication

and figure out the answer themselves.

IRS and TIGTA Studies

Document Poor Tax Law

Assistance, but Most

Taxpayers Received

Timely Help

TAC Quality
Page 26 GAO-02-144 IRS' 2001 Tax Filing Season

about 388 of the 413 TACs—or 94 percent—would have said that their

sites were successful or very successful in providing accurate answers to

tax law questions. However, managers we spoke with said that their

opinions were based on their knowledge of such considerations as staff,

training, and experience, since IRS currently lacks a system or measures

for assessing tax law accuracy. We discuss the group managers’ views of

their sites’ performance in more detail later.

IRS recognizes that the time that taxpayers wait to receive assistance is

also an important indicator of TAC performance. Accordingly, TAC

managers monitor daily average wait-times at each site in an attempt to

minimize average wait-times and maximize the percentage of taxpayers

who receive assistance within 15 minutes.

Most taxpayers waited 15 minutes or less to get assistance during the 2001

filing season, although the timeliness of TAC assistance declined slightly

from last year, based on various data. In 2000, IRS reviewers who posed as

taxpayers reported that wait-times exceeded 15 minutes for 9 percent of

their 544 contacts. For the 2001 filing season, however, TIGTA reviewers

reported waiting more than 15 minutes for 24 percent of their 90 contacts.

According to wait-time data reported by TACs, about 12 percent of the

nearly 3.5 million taxpayers whose wait-times were recorded waited more

than 15 minutes to get assistance during the 2001 filing season.32 Similarly,

IRS customer satisfaction surveys conducted during similar filing season

periods in 2000 and 2001 showed that most respondents waited less than

15 minutes for assistance in both years, but a greater proportion of

respondents waited longer than 15 minutes in 2001 than in 2000, as

illustrated in figure 2.33

 32Based on our calculations, the data reported by TACs did not account for the wait-times

of about 661,000 taxpayers.

33Customer satisfaction surveys were conducted every fifth week, and the results were

summarized and reported the following quarter by the survey contractor. According to IRS,

the survey methodology will be different for the 2002 filing season. Instead of conducting a

survey every fifth week, every customer who comes to the screener’s desk in a TAC

seeking assistance will be given a survey card.

TAC Timeliness
Page 27 GAO-02-144 IRS' 2001 Tax Filing Season

Figure 2: Wait-Time Reported by Customer Satisfaction Survey Respondents

Source: IRS Customer Satisfaction Survey, Field Assistance Intercept Survey, June 2001.

Of the 10 areas that TAC customers were asked to rate as part of the

satisfaction survey, “promptness of service,” was among the three areas

rated lowest (along with “convenience of office location” and

“convenience of office hours”).34 However, even those lowest-rated areas

received average scores above 6 on a 7-point rating scale, with 7 being the

highest rating. Overall, the combined survey results from January,

February, and March 2001 showed that 90 percent of the respondents

rated their overall satisfaction with assistance received as 6 or 7 on a 7-

point scale, for an average overall rating of 6.46.

The IRS and TIGTA teams that reviewed the quality of TAC tax law

assistance in 2000 and 2001, respectively, recommended several changes

to improve quality. For example, one recommendation resulting from IRS’

reviews was that IRS develop a comprehensive, year-round quality review

program for TACs. Field assistance officials informed us that IRS was

studying how field assistance quality should be measured and that IRS

deferred making changes to improve the accuracy of tax law assistance

until the results of that study were known.

 34The survey results also showed that the three areas rated highest on average by

respondents were, in order: “showing the right attitude;” “employee courtesy;” and “treating

you fairly.”

IRS Deferred Making

Quality Improvements

During 2001

72

61

21 26

7

13

0

10

20

30

40

50

60

70

80

Percentage of 

respondents

<15 15-30 >30

Minutes

Jan-Mar 00 Jan-Mar 01
Page 28 GAO-02-144 IRS' 2001 Tax Filing Season

According to information provided by, or discussed with, field assistance

officials, IRS had successfully piloted a new method of measuring the

accuracy of tax law assistance and expected to begin using it in 2002.

Under this new method, contractor employees, posing as taxpayers in

need of assistance, are to visit TACs and ask pre-defined questions—

similar to the technique used by TIGTA and IRS quality reviewers during

the last 2 filing seasons. For 2002, contractor employees are to use

questions selected from those frequently asked by taxpayers who call IRS’

toll-free telephone lines until IRS develops a database of questions

frequently asked by TAC customers.

According to officials, IRS also plans to measure the quality of the account

and return-preparation assistance provided by TACs, using a cadre of

seven full-time IRS staff beginning in January 2002. IRS plans to fill these

positions and train selected staff by November 2001. These IRS reviewers

will evaluate the accuracy of prepared returns and adjustments made to

taxpayer accounts on a sample basis.

Because of the many changes related to TAC operations and the lack of

performance measures for assessing quality, we obtained the views of

managers responsible for a randomly selected sample of 84 TACs.35 On the

basis of this sample, we estimate that managers would have been

overwhelmingly positive in rating their sites’ performance in nearly every

category, in spite of a variety of obstacles that the managers said

hampered site performance to varying extents. As noted earlier, our

estimate shows that the managers were much more positive about the

accuracy of their sites’ tax law assistance than would seem warranted by

the results of TIGTA’s study. However, the managers generally

acknowledged that their ratings were based more on their knowledge of

such considerations as site staffing, training, and experience than on any

specific performance data.

The managers in our sample also cited several obstacles that hampered

site performance to a moderate or great extent.

• Managers cited problems with facilities at 38 percent of the sites. For

example, managers often mentioned that their sites’ workspace was too

 35Many managers were responsible for more than one TAC.

Most Managers Rated

Their Sites’ Filing Season

as Successful or Very

Successful Despite

Obstacles
Page 29 GAO-02-144 IRS' 2001 Tax Filing Season

small to accommodate customers, ensure privacy in discussing taxpayer

information, or accommodate assigned staff or computers.

• Managers mentioned staffing problems at 32 percent of the sites. Many

managers said that their sites lacked sufficient field assistance staff, which

forced some sites to rely more heavily on compliance staff and sometimes

forced taxpayers to wait longer than an hour for assistance.

• Managers cited equipment problems at 31 percent of the sites. Managers

said that their sites lacked sufficient computers—especially those

equipped to access taxpayer accounts or file returns electronically. Some

managers said that staff virtually had to stand in line to use the only

computer with access to customer accounts.

• Managers mentioned training problems at 29 percent of the sites. Many

managers said that employees, especially those in the new TRR positions,

received only part—and in some cases, none—of their required first-year

training before the beginning of the filing season. Some said their

employees received training during the busy filing season, affecting

operations or requiring compliance backup. Still other managers said that

their employees had received the required training, but it did not

adequately cover complex tax law topics or topics that were unique to

certain geographic areas.

Although our telephone survey was designed to address only the filing

season, some managers informed us that IRS had resolved some problems

after the filing season. However, many responses implied that the sites’

problems remained unresolved. In that regard, field assistance officials

told us in October 2001 that IRS plans to resolve TAC computer hardware

and software shortages by 2004 and TAC facility design and space

inadequacies by 2007.

The results of our telephone survey are highlighted in appendix III.

IRS’ Web site on the Internet provides a vehicle whereby taxpayers can

receive assistance without having to contact IRS employees via more

expensive modes of communication, such as calling or visiting an IRS

office. Among other things, the Web site provides the potential to

download hundreds of tax forms and publications, contains current

information on tax issues and electronic filing, and gives taxpayers the

opportunity to ask IRS tax law and procedural questions via E-mail.

Various indicators related to IRS’ Web site show that (1) overall usage

increased compared to the 2000 filing season; (2) IRS received fewer Email questions from taxpayers but generally did a good job responding to

Indicators Related to

IRS’ Web Site Are

Generally Positive,

but the Site Could Be

More User-friendly
Page 30 GAO-02-144 IRS' 2001 Tax Filing Season

the questions; and (3) the site’s availability and average delivery time as

measured by Keynote, an independent Web site rater, improved late in the

filing season after a slow start.36 Our assessment of the Web site showed

that (1) a key IRS measure for tracking site usage—hits—is calculated in a

way that calls into question its usefulness and (2) the site is useable, but

could be more user-friendly. IRS is in the process of revising the content

and management of its Web site—changes that should address the

problems we identified.

IRS’ Web site was used more in 2001 than in 2000 based on various

measures. A key measure IRS uses to track usage is hits. Although IRS

data showed that the number of hits, as of June 1, 2000 and 2001, had

increased from 1.1 billion to 1.7 billion, the way hits are counted calls into

question the usefulness of that measure as an indicator of usage. For

example, every time a person accesses the home page of IRS’ Web site,

about 16 hits are counted because the page and each graphic on it are

counted as a single hit. A hit is also counted every time a user moves to

another page on the Web site. Thus, an increase in the number of hits may

not necessarily be due to increased usage, but could be attributed to

changes in the structure of the home page or problems users are

experiencing in finding what they want on the site. Officials responsible

for the Web site acknowledged that number of hits is not a good measure

of use and said that IRS is limited in the measures it can use, in part due to

privacy considerations.

The number of hits was the key measure that IRS used to assess the

performance of its Web site until 2001, when it added the number of forms

downloaded as a measure. That measure and another indicator compiled

by a non-IRS source showed the following growth in the use of IRS’ Web

site.

 36According to Keynote, availability is the percentage of time the Web site’s home page

downloads fully and average delivery time is the time it takes for the home page to fully

download from the time the user hits the “enter” key on the keyboard. According to IRS, a

home page is charged with an error and therefore receives a lower percentage of

availability even if a graphic that has nothing to do with the user’s ability to get pertinent

content information from the page does not download properly. As such, according to IRS,

the measure does not reflect whether the Web site itself is available or not. Also, according

to IRS, errors can be the result of heavy traffic on the Internet in general and may have

nothing to do with the home page.

Overall Usage of IRS’ Web

Site Increased
Page 31 GAO-02-144 IRS' 2001 Tax Filing Season

• About 279 million forms and publications had been downloaded from the

site as of August 31, 2001, an increase of 116 percent compared to the 129

million downloaded as of the same point in time in 2000.

• Nielsen//NetRatings, an Internet audience measurement service, reported

about 13 million unique visitors to IRS’ site from February 4 through May

6, 2001—an increase of about 57 percent over the 8.3 million unique

visitors during the same time period in 2000.37

Nielsen//NetRatings also reported that on the last day of the 2001 filing

season (April 16), 613,000 unique visitors accessed IRS’ site.38 According to

Nielsen//NetRatings, IRS’ site has become the “go to” online resource for

timely and useful tax information.

One area of IRS’ Web site that was not used more in 2001 than in 2000 was

the feature that allows taxpayers to ask IRS tax law and procedural

questions via E-mail. As of June 1, 2001, IRS had received about 28 percent

fewer E-mail questions—about 159,000 compared to about 220,000 as of

the same time in 2000. IRS officials attributed this decrease to the absence

of major tax law changes affecting returns to be filed in 2001.

IRS uses three measures for assessing its performance in responding to Email questions: (1) timeliness, (2) accuracy, and (3) customer satisfaction.

IRS data for the 2001 filing season show that IRS (1) improved its

timeliness compared to 2000, (2) maintained the same level of accuracy as

in 2000, and (3) received generally positive ratings from respondents to its

customer satisfaction survey.

IRS’ goal is to respond to an E-mail question within 2 business days. IRS

data indicate that IRS almost always met its goal during the 2001 filing

season and that it did better than in 2000. For example, IRS took an

average of 0.8 business days to respond to taxpayers’ E-mail questions in

2001, compared to 1.3 business days in 2000.

 37“Unique visitors” refers to the number of different persons who accessed the Web site at

least once during a day.

38This information helps illustrate how misleading the “hits” measure can be. While

Nielsen//NetRatings reported 613,000 unique visitors to IRS’ site on April 16, 2001, IRS

reported about 60 million hits that day.

Number of E-Mail

Questions Decreased; IRS

Generally Did a Good Job

Responding
Page 32 GAO-02-144 IRS' 2001 Tax Filing Season

To measure accuracy, a quality review group reviews a random sample of

E-mail responses. IRS data on the results of those reviews showed that 78

percent of E-mail questions were answered accurately during the 2001

filing season. Given the statistical imprecision surrounding a sample, that

rate is consistent with the 76 percent accuracy rate in 2000 and IRS’ 79

percent goal for 2001.

IRS gives all E-mail customers an opportunity to respond to a customer

satisfaction survey, and about 1,400 did so between January 1 and April 16,

2001. The survey asked three questions about the E-mail service received.

In response to those questions, 96 percent of the respondents said that

they were satisfied with the time it took to get a response, 91 percent said

that they would use E-mail again in the future, and 75 percent said that the

response they received answered their question.

Keynote, an independent Web site rater and recognized authority on

Internet performance, reviewed the availability and average delivery time

of IRS’ Web site and reported that IRS’ performance was mixed during the

2001 filing season.

Keynote reported that its measure of IRS’ Web site’s availability ranged

from 65 to 75 percent between February 4 and March 27, 2001, and

improved dramatically after that—increasing from 67 percent on March 27

to 83 percent the next day. Availability continued to improve after that—

averaging 97.7 percent and 97.5 percent, respectively, for the weeks ending

April 8 and April 16, 2001, respectively. Average delivery time also

fluctuated considerably during the filing season. Keynote reported that

average delivery time ranged from 2.5 seconds to 3.5 seconds from March

1 through March 27, 2001, and improved to around 2 seconds thereafter

through April 15, 2001. Keynote reported that the improvements in

availability and average delivery time coincided with an upgrading of

computer servers in the latter part of March.

Our review of IRS’ Web site disclosed certain aspects that, if improved,

would make the site more user-friendly.

Broken Links—We found 10 instances where links within the site

forwarded us to pages indicating that the document or sites could not be

found. For example, in the “Earned Income Tax Credit” section, when

clicking on the question “How Do I Get Advanced Earned Income Tax

Credit Payments”, we were sent to a page that had a link for getting a copy

Web Site’s Availability and

Average Delivery Time

Improved After a Slow

Start

Web Site Could Be More

User-friendly
Page 33 GAO-02-144 IRS' 2001 Tax Filing Season

of Form W-5 (Earned Income Credit Advance Payment Certificate). When

we clicked on that link, we were sent to the Fedworld.gov site where we

got the message “Address Not Found”.

Missing Information—In the “Around the Nation” section of the site,

there are one or more pages for all states but one. In our report on the

2000 filing season, we noted that many of those state pages did not include

information on the location of TACs—basic information that we thought

should be part of every state page.39 When we checked on May 31, 2001, we

found that 14 state pages still had no data on TAC locations.

Obsolete Data—In our report on the 2000 filing season, we also noted

that certain data on the Web site were obsolete. We also found obsolete

data in 2001, although not as much as in 2000. For example, in the “IRS

Newsstand” part of the site, there is a section entitled “Tax Calendar for

Small Business.” When we looked at that section in April 2001, we found a

calendar for 1999 but none for 2001. Our follow-up in May 2001 revealed

that IRS had since removed the 1999 calendar and added one for 2001.

Difficult to Navigate—We experienced several instances where we

found the Web site to be laborious and cumbersome to maneuver through.

For example, the site offers users the option to comment in a section

called “A Penny for Your Thoughts.” When we clicked on the comment

link, we were directed to a page entitled “Help, Comments, and Feedback.”

We expected to be forwarded to a page for comments since we clicked to

reach a comment page. However, we had to scroll down eight topics to get

to the comment link.

Our overall assessment of IRS’ Web site, on the basis of reviews we

performed throughout the year, is that the site contains a plethora of

information that provides taxpayers with options other than the traditional

methods of walking into an IRS site or calling on the telephone. Given its

size, we found it usable, but not user-friendly. In general, we found the

maze of links not well organized or straightforward. IRS officials

responsible for the Web site agreed with our assessment.

In our report on the 2000 filing season, we recommended that IRS (1)

assign clear responsibility in a central location for identifying and

correcting outdated and inconsistent Web site data and (2) develop

 39GAO-01-158.
Page 34 GAO-02-144 IRS' 2001 Tax Filing Season

minimum requirements for information to be included on the state pages.

According to IRS officials, IRS has taken several steps to address our

recommendation. Those steps include the following.

• The Electronic Tax Administration office within IRS instituted an interim

process that required executives to approve all new data and significant

changes to existing data.

• The Electronic Tax Administration office is implementing a content

management program to ensure that data on the Web site is current and

consistent.

• Beginning in 2002, the IRS Web site will have a central list that provides

the location of all TACs and their hours of operation.

• IRS awarded a 5-year, $33.8 million contract to redesign and provide

support for IRS’ Web site. Anticipated changes include incorporating

features for easier maneuverability.

We believe IRS’ actions go a long way toward addressing our

recommendation. We plan to continue monitoring their implementation.

IRS’ performance during the 2001 filing season varied depending on the

particular filing season activity being considered. For some activities—

processing and the Web site—available evidence indicated that IRS

generally did a good job and taxpayers generally received good service.

Even so, there were some exceptions involving processing by a lockbox,

implementation of an alternative signature program, and initial problems

with the Web site’s availability and delivery time. For other filing season

activities—telephone service and TAC assistance—there was evidence to

indicate that many taxpayers had problems reaching IRS by telephone and

getting accurate responses to their tax law questions from TAC personnel.

In each of these areas, IRS has taken steps to improve its performance—

steps that include initiatives to enhance the processing of paper returns

and encourage more electronic filing, a contract to redesign and provide

support for IRS’ Web site, and a study on how best to measure the quality

of TAC assistance. However, there are opportunities for IRS to further

enhance its performance.

In some cases, there is available information from quality reviews done by

TIGTA and IRS and from the results of our survey of TAC managers that

IRS can use to immediately identify and begin implementing needed

enhancements. While we recognize that there are limits to what IRS can

do to affect the 2002 filing season, there may be certain conditions

Conclusions
Page 35 GAO-02-144 IRS' 2001 Tax Filing Season

identified by the quality reviews and our survey that lend themselves to

relatively easy resolution.

In other cases, needed enhancements may be going unidentified because

IRS has inadequate information on the effectiveness of processing

initiatives and the reasons why computer-prepared tax returns are filed on

paper. Without adequate information on the effectiveness of initiatives

(those undertaken in 2001 as well as any that may be undertaken in the

future), IRS does not have a sound basis for deciding whether to continue,

curtail, or revise the initiatives. Similarly, the absence of detailed research

focused on paper filers of computer-prepared returns leaves IRS without

sufficient information to identify specific impediments that must be

overcome if that large group of returns (40 million in 2001) is to be

successfully converted from paper to electronic.

In spite of our characterization of IRS’ performance in processing returns

and refunds as smooth and recognizing that IRS does have comparable

historical data for workload indicators, we are concerned about our

limited ability to compare IRS’ performance in 2001 against its goals for

2001 and its performance in past years. While we support IRS’ efforts to

develop and refine its performance measures to help assure that they are

valid and balanced, frequent or extensive changes deprive the various

programs of stability and comparability, thus hampering the ability to set

or achieve goals. We are currently assessing IRS’ filing season

performance measures and expect to issue a report on our results in April

2002. However, we obtained enough information on one filing season

measure—Web site hits—during this review to indicate that it is not a

useful measure for assessing the site’s performance.

We recommend that the Commissioner of Internal Revenue direct the

appropriate officials to do the following:

• To the extent practical, take action to correct tax law accuracy problems

reported by IRS and TIGTA in 2000 and 2001, respectively, in time to

improve the accuracy of tax law assistance provided by TACs in the 2002

filing season rather than deferring quality improvements until data from

the new measurement system are available.

• Work with TAC managers to determine if there are any significant facility,

staffing, equipment, and training problems that are not addressed in

existing improvement plans, and develop appropriate plans for resolving

those problems.

Recommendations for

Executive Action
Page 36 GAO-02-144 IRS' 2001 Tax Filing Season

• Directly survey tax practitioners and taxpayers who prepare returns on

computer but do not file electronically.

• Develop a plan for evaluating the implementation and effectiveness of

processing initiatives.

• Either discontinue the use of hits as a measure of the performance of IRS’

Web site or revise the way hits are calculated so that the measure more

accurately reflects usage.

Additional recommendations were included in our report on IRS’

telephone assistance during the 2001 filing season40 and may be

forthcoming as a result of our ongoing review of IRS’ filing season

performance measures.

We requested comments on a draft of this report from IRS. We obtained

written comments in a December 13, 2001, letter from the Commissioner

of Internal Revenue (see app. V).

The Commissioner said that overall he concurred with our conclusion that

the processing of returns and the issuance of refunds went smoothly. He

provided some additional information related to IRS’ handling of the

problem with the lockbox contractor in Pittsburgh, which we added to the

report.

The Commissioner pointed out, as our report reflects, that developing and

revising performance measures is critical to IRS’ “Balanced Measures

concept as is aligning those measures with [IRS’] strategic plan.” At the

same time, he said that he understood our concerns that too frequent or

extensive changes to performance measures could invalidate subsequent

comparison and said that “we factor that into changes necessary to

accomplish our transition.”

In response to our specific recommendations, the Commissioner said the

following:

• Improving tax law accuracy at TACs is “a core competency of the Service

and we are not waiting for data to make incremental improvements.” To

improve quality during the 2002 filing season, according to the

Commissioner, IRS will focus on providing (1) consistent, standardized

 40GAO-02-212.

Agency Comments

and Our Evaluation
Page 37 GAO-02-144 IRS' 2001 Tax Filing Season

services; (2) a larger and better trained workforce; and (3) improved

accessibility to taxpayer information for employees directly responsible

for case-specific assistance.

• IRS has plans to resolve all issues concerning TAC facilities, staffing,

equipment, and training identified in the report. To engage managers fully

in the improvement process, IRS will be implementing Manager Councils

in each of the seven field assistance areas.

• IRS agrees with the need for a survey of tax practitioners and taxpayers

who prepare their returns on computer but file on paper.

• As new processing initiatives are developed, IRS will incorporate a plan in

its project documentation to assess the implementation and effectiveness

of each initiative. While agreeing that IRS should review its initiatives to

“ensure their proper implementation and ensure they are targeted to

achieve the results intended,” the Commissioner said that the processing

initiatives discussed in the report are inherently beneficial because “they

resolve or mitigate known problems or weaknesses.”

• IRS believes that it should continue to use hits as a measure of Web site

performance because the number of hits “indicates site usage/traffic” and

because IRS uses the number of hits “to measure system performance and

to estimate system needs.” However, IRS said that it can improve its

method for counting hits when it implements a more sophisticated,

comprehensive web analytic program in January 2002. We agree that the

current measure of hits may have uses internally. However, unless

computation of the measure is appropriately revised, it should not be used

as an indicator to describe overall usage to external stakeholders, such as

the press or the Congress. In an April 26, 2001, news release, for example,

IRS used the number of hits to support its statements that the Web site

“attracts more taxpayers” and “remains one of the most frequently visited

sites during tax season.” We believe that such uses of the measure, as

currently constructed, are inappropriate.

In further commenting on the Web site, IRS expressed concern that

readers would be mislead by our use of Keynote data on site availability

unless we more clearly explained what Keynote means by “availability.”

We revised the report to do that.
Page 38 GAO-02-144 IRS' 2001 Tax Filing Season

In general, the various plans described in IRS’ comments appear

responsive to our recommendations. We will be assessing IRS’

implementation of those plans during our review of the 2002 filing season.

We are sending copies of this report to the Chairmen and Ranking

Minority Members of the Senate Committee on Finance and the House

Committee on Ways and Means and the Ranking Minority Member of this

Subcommittee. We are also sending copies to the Secretary of the

Treasury; the Commissioner of Internal Revenue; the Director, Office of

Management and Budget; and other interested parties. We will make

copies available to others on request.

This report was prepared under the direction of David J. Attianese,

Assistant Director. Other major contributors are acknowledged in

appendix V. If you have any questions about this report, contact

Mr. Attianese or me on (202) 512-9110.

Sincerely yours,

James R. White

Director, Tax Issues
Appendix I: Problems IRS Experienced in

2001 Related to Processing

Page 39 GAO-02-144 IRS' 2001 Tax Filing Season

Given the size and complexity of IRS’ processing operations, it is

inevitable that IRS may experience some problems during the filing

season. In addition to the more significant problems discussed in the body

of the report related to (1) returns and remittances destroyed or not

processed by the Pittsburgh lockbox and (2) rejected electronic

submissions that limited the impact of the self-select PIN program, IRS

experienced some relatively minor problems related to TeleFile,1

 the debt

indicator database,2

 and the printing of notices.

IRS experienced two problems with TeleFile. The first problem involved a

computer programming error that created some incorrect addresses in the

TeleFile database. According to IRS, the problem affected taxpayers who

had moved in 2000 and whose address included an apartment number.

Because IRS did not know if the problem would be resolved by April 16,

2001, it told affected taxpayers, through an April 3 alert on its Web site,

that they should only use TeleFile if they expected a refund and would

have the refund directly deposited into their bank account. Otherwise,

their refund or balance due notice, if they owed money, would be mailed

to the wrong address. According to IRS, about 45,000 taxpayers could have

been affected by this problem, which, according to IRS, has been

corrected for the 2002 filing season.

The second TeleFile problem involved incorrect customer numbers

printed on about 192,000 TeleFile packages by an IRS contractor.

Customer numbers are used by taxpayers to identify themselves when

using TeleFile. The contractor sent notices with corrected numbers to

affected taxpayers to enable the affected taxpayers to file via telephone.

IRS notified taxpayers of the problem via the Web site or over the

telephone if they called IRS.

IRS reported a programming problem with the debt indicator database at

the start of the filing season that resulted in IRS’ failure to identify some

individuals as having offsets before they were provided a Refund

 1

TeleFile is the system through which taxpayers send returns directly to IRS over telephone

lines using a Touch-Tone telephone.

2

The debt indicator database contains information on certain debts owed by taxpayers,

such as federal taxes, unpaid student loans, and child support. The indebted taxpayer’s

refund check is intercepted, and funds are redirected to pay the debt.

Appendix I: Problems IRS Experienced in

2001 Related to Processing

TeleFile

Debt Indicator

Database
Appendix I: Problems IRS Experienced in

2001 Related to Processing

Page 40 GAO-02-144 IRS' 2001 Tax Filing Season

Anticipation Loan. These are loans that private firms offer taxpayers who

file electronically. The loan amount is based on the amount of the

taxpayer’s expected refund, and the refund is sent directly to the loan

provider to pay off the loan. Firms that provide such loans rely on

information from IRS to determine whether there will be an offset against

the taxpayer’s refund. If there is going to be an offset, the firm will deny

the loan. IRS determines if an offset exists by checking against the debt

indicator database. Because of the programming problem, loan providers

received inaccurate information from IRS about the existence of an offset.

Some returns that were shown without offsets actually had offsets taken

when the refunds were processed. According to IRS and other sources,

loan providers were adversely affected by this problem in that they made

loans that were to be repaid by tax refunds that were not forthcoming.

According to IRS, the problem was first identified in January 2001 and

corrected on February 1, 2001.

IRS reported and corrected a computer-system related problem at the

beginning of the filing season related to the printing of notices. In one

case, about 8,000 payment due notices were not mailed in a timely manner.

To remedy the situation, IRS included Publication 3746 in the notice when

it was mailed to apologize for the delay and note that (1) the payment due

date was extended without impact on the amount due and (2) any

additional penalty and interest incurred due to the delayed mailing would

be abated. In addition, IRS informed employees of the issue, gave them

procedures for dealing with taxpayers who inquired about the delayed

mailings, and authorized them to abate any penalty or interest amounts

when appropriate. According to IRS, it identified and corrected this

problem in less than 2 weeks—by mid-January 2001.

Printing of Notices
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 41 GAO-02-144 IRS' 2001 Tax Filing Season

In 2001, IRS took several steps to encourage electronic filing and

implemented various processing initiatives that were intended to either

improve its processing operations or enhance compliance. Our past work

on the Government Performance and Results Act of 1993 demonstrated

the benefits of evaluating initiatives that are aimed at improving

performance. Likewise, IRS guidance requires that plans for improving

performance include steps to monitor and evaluate the effectiveness of

those actions. IRS’ filing season initiatives may have inherent benefits

beyond improving performance, such as increasing compliance, and it may

take years until the benefits are fully achieved. However, in some cases,

IRS experienced problems that affected implementation and limited the

effectiveness of these initiatives. For example, despite concerted efforts,

IRS experienced problems in processing Schedule K-1s. We had a difficult

time determining the effect of such problems and the overall effectiveness

of the initiatives. IRS’ evaluations of initiatives were limited, and IRS

officials generally drew conclusions about the effectiveness of initiatives

based on broad numbers and trends. IRS officials said that although

initiatives may not be specifically evaluated for effectiveness, they are

evaluated for resource planning and other purposes as part of filing season

readiness reviews and the development action plans to prepare for the

next filing season. While we are aware of this fact, we are unconvinced

that evaluations as part of filing season readiness reviews would be

sufficient for determining effectiveness.

As it does every year, IRS undertook initiatives designed to encourage

electronic filing. The initiatives for 2001, in addition to the alternative

signature program discussed in the body of the report, included increasing

the number of forms and schedules to be electronically filed and allowing

tax practitioners to include notes to IRS on their electronic submissions.

As noted previously, IRS uses meetings with the tax practitioner

community to identify barriers and options for expanding electronic filing,

but because evaluations of effectiveness have been limited to date, IRS

may be missing key data needed to design an effective strategy for

continuing to increase electronic filing.

IRS added 23 more forms and schedules to the list of forms and schedules

that can be filed electronically and increased the number of certain forms

that could be filed electronically in 2001. IRS took these actions to enable

more taxpayers and practitioners to file more returns electronically and to

address an issue raised by some practitioners who say that they will file all

of their returns either electronically or on paper, but not both. IRS

estimated that with the 23 additional forms and schedules, 98 percent of

Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

IRS Continued to

Expand Electronic

Filing Options, but

Evaluations of

Effectiveness Have

Been Limited
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 42 GAO-02-144 IRS' 2001 Tax Filing Season

all individual taxpayers could file their income tax returns electronically in

2001. IRS plans to add 38 more forms and schedules for 2002, which,

according to IRS, will enable over 99 percent of all individual taxpayers to

file their income tax returns electronically in 2002.1

As of October 18, 2001, about 1,044,000 of the newly eligible forms and

schedules had been filed.2

 Of the 23 forms and schedules, only one, Form

2106EZ (Unreimbursed Employee Business Expenses), was filed

electronically to any great extent—about 930,000 times—and 18 were filed

electronically less than 3,000 times. As of October 2001, other than

compile these statistics, IRS had not done, nor did it plan to do, other

evaluations of this initiative. As a result, IRS does not know, for example,

how many new taxpayers filed electronically or how many practitioners

decided to join the electronic filing program because of the addition of

these 23 forms and schedules.

Besides allowing more forms and schedules to be filed electronically in

2001, IRS also increased the number of certain forms or schedules that can

be filed with each electronic return. For example, the number of Schedule

Es (Supplemental Income and Loss) that could be filed with each

individual electronic tax return was increased from 5 to 15.

Before 2001, there was no way for a practitioner to add a note to an

electronic submission to support or explain an entry on an electronic tax

return. Practitioners had suggested that this limitation provided a

disincentive to file electronically. In response to that input, IRS, for the

2001 filing season, allowed tax practitioners to write notes to support or

clarify an entry on an electronic tax return. Although practitioners

supported this initiative, it was not used extensively. IRS figures showed

that about 4,000 electronically filed tax returns contained such notes.

What IRS does not know is (1) how many, if any, of these 4,000

occurrences involved a first time electronic filer, and (2) how many

 1

This 99-percent figure relates to the electronic filing of individual income tax returns and

not business-related returns. Significant restrictions for filing business returns

electronically still exist. For example, key business-related documents, including the basic

corporate income tax form (Form 1120), cannot be filed electronically. Some practitioners

have said that they will not participate in the electronic filing program until they can file

both individual and business-related forms electronically.

2

This number cannot be equated to the number of returns because one return could include

more than one of the 23 forms and schedules.
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 43 GAO-02-144 IRS' 2001 Tax Filing Season

practitioners decided to join the electronic filing program because of this

new feature.

IRS implemented various initiatives related to its processing of individual

tax returns. IRS experienced some problems that affected implementation,

but the extent to which these problems affected implementation and

potential benefits downstream was difficult to determine because of the

limited data, analysis, and evaluations of effectiveness.

To better ensure that persons are correctly determining their tax liability,

IRS verifies the SSNs on all individual income tax returns. Until the 2001

filing season, however, that verification did not include all secondary

SSNs.3

 IRS began verifying all secondary SSNs on paper and electronic

returns in the 2001 filing season and disallowing questionable exemptions

using its math-error authority.4

IRS established an extensive, multistep process to determine whether to

accept a secondary SSN, which, according to IRS, met the requirements of

the Internal Revenue Code and minimized the burden placed on taxpayers.

As a first step in the process, IRS sent notices to taxpayers who it had

identified in 2000 as having invalid secondary SSNs to encourage them to

take steps to resolve the problem before filing their return in 2001. During

the 2001 filing season, all incoming joint returns were to be manually

reviewed to determine whether the taxpayer enclosed any information

about a name change, marriage, or divorce. IRS was to use this

information to accept the secondary SSN and process the return according

to normal procedures. If no such information was enclosed with the

 3

IRS had attempted to verify secondary SSNs during the 2000 filing season but reported

significant problems that caused a high number of returns to fall out as errors during

processing. As a result, IRS discontinued the verification process in 2000 and made changes

for the 2001 filing season.

4

As IRS processes returns, it looks for computational errors made by taxpayers or their

representatives in preparing the returns. When IRS finds such errors, it can automatically

adjust the return through the use of its math-error authority. In 1996, the Congress first

authorized IRS to treat invalid SSNs as math errors.

IRS Implemented

Several Processing

Initiatives, But

Problems Arose and

Evaluations Were

Limited

Secondary SSNs Were

Validated
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 44 GAO-02-144 IRS' 2001 Tax Filing Season

return, IRS was to check the name and secondary SSN against Social

Security Administration and IRS computer records. If a mismatch

occurred, IRS was to pull the return out of normal processing for manual

research. According to IRS officials, the notices that were issued prior to

the filing season and the research IRS performed on filed returns helped

keep to a manageable level the percentage of returns that had to be

adjusted because of secondary SSNs that did not match. Also, as part of

this process, IRS did not alter the joint filing status claimed on a return if it

contained a mismatched name and secondary SSN—this had been a

concern at one point. However, using its math-error authority, IRS would

disallow the spousal exemption and any earned income credit if there

were a mismatch that IRS could not resolve through research.

In September 2001, TIGTA reported that it found inconsistencies between

IRS’ instructions for employees and instructions to taxpayers for

secondary SSN validation.5

 For example, TIGTA reported that the

instructions to taxpayers did not make clear that it was acceptable to send

IRS documents, such as marriage certificates, to support a name change.

However, IRS’ processing instructions cited such documentation as valid

support for accepting a secondary SSN. TIGTA also found that IRS

incorrectly denied about $1 million in personal exemptions and earned

income credits after erroneously determining that about 1,800 secondary

SSNs on returns that posted to IRS’ computer system during the week of

April 29, 2001, were invalid. TIGTA’s review showed that the secondary

SSNs were valid and that the exemptions and credits should have been

allowed. According to TIGTA, these processing errors occurred because

IRS had not either (1) considered certain documentation provided by the

taxpayers to support the validity of the secondary SSN or (2) followed its

research and resolution procedures.

IRS officials reported few processing problems with this initiative, other

than those identified by TIGTA, and considered the initiative to be

effective based on broad trends, such as the number of returns that had

errors. In August 2001, IRS officials told us that although they had ideas

about what to include in a written plan to obtain data and perform more

in-depth analysis to help determine the effectiveness of the effort, they had

not yet written such a plan. Due to other priorities, IRS officials reported

 5

The Internal Revenue Service Successfully Processed Individual Tax Returns During the

2001 Filing Season, TIGTA, Reference No. 2001-40-192, Sept. 28, 2001.
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 45 GAO-02-144 IRS' 2001 Tax Filing Season

that as of October 5, 2001, plans to design an evaluation and do more indepth analysis of this initiative were postponed indefinitely.

For the 2001 filing season, IRS implemented the third-party-authorization

checkbox on individual income tax returns (excluding returns filed via

TeleFile) in response to input from external stakeholders. The checkbox

allowed taxpayers to authorize an individual return practitioner—but not

the company for which the practitioner worked—to serve as their

representative in resolving problems (such as math errors, inquiries about

missing tax return information, and questions regarding refunds or

payments) that arise during processing of the return. With the checkbox,

taxpayers could authorize this kind of limited representation without

having to submit a Form 2848 (Power of Attorney and Declaration of

Representative) or Form 8821 (Tax Information Authorization). These

other designations give practitioners much more authority than the thirdparty-authorization checkbox.

IRS has referred to the initiative as a “burden reduction project,”

estimating that it would save taxpayers about 75,000 hours by not having

to prepare Form 8821, about 2 million hours by not having to prepare

Form 2848, and more than a million hours by IRS directly communicating

with paid practitioners to resolve issues rather than going through the

taxpayer. In addition, IRS asserted that the designation would allow

processing issues to be resolved immediately, thereby eliminating some

postfiling contacts, such as the mailing of notices.

From our perspective, this initiative was of limited success for three

reasons. First, representatives of the largest tax return preparation

company told us that the initiative was of little value to them, and it was

their official policy not to use the checkbox. They said that the company

blocked the checkbox field in the software used by its affiliates so that it

could not be used. The representatives explained that the authorization

required the name or designation of an individual and not a company to

discuss tax matters. Because this company relies heavily on temporary

employees who may or may not be working for the company after the

filing season, no one else in the company would be able to address issues

related to a particular return.

Second, according to IRS officials, IRS had limited capability to call

taxpayers or their practitioners to resolve issues during processing.

Therefore, according to IRS officials, in many cases, IRS still issued

notices instead of calling taxpayers or their practitioners directly during

Third-Party-Authorization

Checkbox Was

Implemented
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 46 GAO-02-144 IRS' 2001 Tax Filing Season

processing. IRS officials acknowledged that not all submission processing

centers are equipped to allow employees to call taxpayers or practitioners

to resolve issues that arise during processing. Of the two centers we

visited, one had a “call-out” unit where IRS employees could make calls to

resolve issues that arose during processing. At that submission processing

center, IRS officials said that they received limited guidance and training

related to the third-party-authorization checkbox. While they did make

some calls out, they did not keep track whether they were calling a

practitioner, using the checkbox authorization, or calling a taxpayer, using

the taxpayer’s telephone number on the return. An IRS official told us that

some employees would rather call the taxpayer, even if the authorization

box were checked, because in all likelihood the taxpayer would be able to

answer the call and be more responsive than a practitioner. Employees at

the other center never had a call-out unit and, therefore, did not use the

authority to contact practitioners. Without the ability to call, IRS would

have had to send notices to taxpayers, negating the intended benefit of

reducing such contacts.

Third, because of discrepancies between instructions to taxpayers and

IRS’ processing instructions, it was unclear if the primary intent of the

checkbox was to enable IRS employees to call practitioners or enable

practitioners to call IRS. Several practitioners we talked to said that they

were confused by the intent. The Director of Submission Processing

Operations told us that this initiative was driven by practitioners’ desire to

call IRS on behalf of their clients versus IRS’ desire to call the

practitioners. However, we believe that if some centers are calling

practitioners and others are not, this represents disparate treatment of

taxpayers and represents a failure on IRS’ part to realize the full potential

of this authority. While practitioners we interviewed and ones that we met

with at IRS’ tax forums expressed frustrations and had complaints about

IRS’ implementation of this initiative, we heard strong support of the

initiative as well.

The Director of Submission Processing Operations told us that IRS has

delayed establishing additional call-out units as IRS continues to study the

cost, resources, and overall effectiveness of such units. According to the

Director, IRS is not sure if it is more cost effective to call taxpayers or

their practitioners during processing or to send a notice and have the

taxpayer or practitioner respond. As a result, IRS did not have the benefit

of this information prior to implementation of the initiative for comparison

purposes.
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 47 GAO-02-144 IRS' 2001 Tax Filing Season

According to IRS, taxpayers checked the box on about 28 million returns

during the 2001 filing season, or less than half of the approximately 69

million returns prepared by practitioners. IRS used this broad number as

the basis for its assumption about the initiative's success. However, it

lacked supporting detailed analyses and a written plan for fully assessing

effectiveness to support claims of success. For example, IRS could tell us

the number of taxpayers who checked the authorization box, but did not

have in place a system for sampling or tracking how the use of the

checkbox authority facilitated the resolution of issues related to a return’s

processing. Nor could IRS officials tell us how many, if any, fewer notices

were issued as a result of the checkbox authority.

Trust, partnership, and subchapter S corporation filings have been steadily

increasing. For example, IRS reported that between 1997 and 2000,

partnership filings have increased almost 18 percent to over 2 million.

These filings are referred to as “flow-through returns” because they pass

their income through the trust, partnership, or corporation to

beneficiaries, partners, and shareholders who are to claim the income on

their individual income tax returns. IRS estimates that billions of dollars of

such income (referred to as “pass-through income”) are underreported

every year. IRS expected 8.5 million flow-through returns would be filed in

2001, passing through hundreds of billions of dollars to beneficiaries,

partners, and shareholders.

When the project to transcribe Schedule K-1s was initiated, IRS expected

that 30 million schedules would be filed with these flow-through returns—

20 million on paper and 10 million electronically. IRS’ goal was to

transcribe 100 percent of the schedules during the 2001 filing season.6

 The

transcribed data would later be matched against income shown on

individuals’ income tax returns to help ensure that taxpayers accurately

reported income received from partnerships, trusts, and subchapter S

corporations. The last time IRS had transcribed Schedule K-1 information

was in 1995, when IRS transcribed about 4.1 million schedules.

IRS officials took various actions to help ensure successful

implementation of this program. Specifically, they piloted the initiative at

 6

IRS apparently overestimated the number of Schedule K-1s it would receive during the

2001 filing season. As of October 2001, IRS officials reported receiving about 15 million

Schedule K-1s, or about one-half of the anticipated volume. IRS officials are trying to

determine the reasons behind the discrepancies between anticipated and actual volumes.

Schedule K-1s Were

Transcribed for Matching

Later
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 48 GAO-02-144 IRS' 2001 Tax Filing Season

four submission processing centers in the Summer of 2000, developed

related procedures, and tested computer programs at the beginning of the

2001 filing season. Despite these and other efforts, IRS experienced

significant problems in processing the Schedule K-1s. For example, in

some cases, IRS employees undercounted the Schedule K-1s attached to a

return, which created problems later on when IRS tried to reconcile the

number of Schedule K-1s in a particular batch of work. At that point, IRS

would have to renumber the Schedule K-1s and ensure that all taxpayers

were identified and that information such as their names and addresses

had been accurately transcribed.

These processing problems contributed to (1) employee productivity

levels that were lower than IRS had estimated, and (2) the need for more

processing resources than anticipated. For example, the initial work plan

estimated that 136 schedules would be processed per hour, a projection

that was later reduced to 60 per hour. The actual productivity level

realized was 50 documents per hour. IRS also estimated that it would

require 585 staff years to process the Schedule K-1s. After taking into

account the fewer staff years needed because of lower than expected

volumes and the larger number of staff years needed because of reduced

productivity, IRS officials estimated a shortfall of about 50 staff years, with

the shortfall being covered by allocating resources from other program

areas. IRS officials attributed the failure to meet productivity levels to

unrealistic expectations about productivity.

Although IRS spent considerable effort working on implementation issues

and some evaluations were done, those evaluations have been limited. For

example, although IRS recalculated productivity to help determine the

cost of processing Schedule K-1s, IRS has yet to compare this information

against original estimates of benefits. Although the true program benefits

are to occur later in the process, when IRS begins matching the Schedule

K-1 information to individuals’ income tax returns and identifies potential

underreporting of income, IRS still could benefit from interim evaluations

of implementation issues and downstream benefits.

In conjunction with the United States Postal Service, IRS implemented an

initiative to use the Postal Service’s National Change of Address (NCOA)

database to update taxpayer addresses. IRS meant for the NCOA update to

provide quicker resolution of undelivered refunds. According to IRS, it

receives downloads of the NCOA database weekly and updates the

addresses in its computer systems. Where there was an exact name match,

IRS was to update its file with the taxpayer’s new address.

IRS Began Using Postal

Service Database to

Update Taxpayer

Addresses
Appendix II: IRS Efforts to Encourage

Electronic Filing and Enhance Returns

Processing in 2001

Page 49 GAO-02-144 IRS' 2001 Tax Filing Season

Before this initiative was implemented, there was disagreement among

some IRS officials over the usefulness of the NCOA database to IRS. The

primary concern of some officials was that the Postal Service could not

supply IRS with statistics regarding the accuracy of information contained

in the database. Despite these concerns, IRS never took action to assess

the database’s accuracy before using it for updates. Similarly, once

implemented, IRS never took action to evaluate the initiative’s

effectiveness.
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 50 GAO-02-144 IRS' 2001 Tax Filing Season

Because IRS did not measure the quality of TAC performance during the

2001 filing season, we obtained the views of group managers regarding (1)

their sites’ success in meeting the demand for services and providing

accurate or timely assistance and (2) the extent that their sites’ success

was hampered by factors related to such things as staffing, training, and

operating hours. Most managers rated their sites’ performance

overwhelmingly positive, despite citing factors that hindered performance

to a varying extent.

We randomly selected a sample of 84 TACs from a listing of 413 TACs that

IRS provided. IRS’ listing did not include alternative or nontraditional

sites, such as mobile units and kiosks. We interviewed some managers

more than once, because they were responsible for more than one site in

our sample. However, we asked them about each site separately. All

percentage estimates from our sample of managers have sampling errors

of plus or minus 10 percentage points or less, with 95 percent confidence.

For each TAC in our sample, we asked the responsible group manager to

rate the site’s success and briefly explain the basis for that rating, in each

of the following areas:

• meeting the total demand for assistance as well as the specific demands

for tax law assistance, return-preparation assistance, and tax forms or

publications;

• keeping the average wait-time for assistance below 15 minutes;

• providing accurate answers to tax law questions; and

• providing accurate return-preparation assistance.

Table 5 presents our nationwide percentage estimates for managers’ views

regarding success in each of these areas for all 413 TACs.

Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Most TAC Managers

Viewed Their Sites’

Filing Season as

Successful or Very

Successful
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 51 GAO-02-144 IRS' 2001 Tax Filing Season

Table 5: Percentage Estimates of TAC Managers’ Views of Their Sites’ Filing Season Success

For the 2001 filing season, to

what extent was your site

successful with respect to

Very

successful Successful

Neither

successful

nor

unsuccessful Unsuccessful

Very

unsuccessful No opinion

Meeting the total demand for all

types of TAC assistance

42 48 8 2 0 0

Meeting the demand for tax law

assistance

46 46 6 1 0 0

Meeting the demand for returnpreparation assistance51 36 11 2 0 0

Meeting the demand for tax forms or

publications

80 18 2 0 0 0

Keeping the average wait-time for

assistance below 15 minutes

68 25 5 1 1 0

Providing accurate answers to tax

law questions

48 46 6 0 0 0

Providing accurate returnpreparation assistance64 31 5 0 0 0

Source: GAO data and analysis.

We also asked managers to explain their positive ratings (“successful” or

“very successful”) and their negative ratings (“unsuccessful” or “very

unsuccessful”) for the various categories in table 5. The explanations that

follow are based on the actual responses from the managers of the 84 sites

in our sample. The numbers of sites shown in parentheses following each

reason do not add up to the number of sites in our sample because (1)

managers often cited more than one reason in explaining their rating and

(2) some managers provided no reason.

Managers cited the following reasons for rating 75 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced in

handling all types of assistance. (51)

• Employees responded appropriately so that few referrals to other sources

of assistance were necessary. (8)

• The same-day appointment system for return preparation ensured

availability of all types of service. (5)

• Sites attained success despite insufficient staff, equipment, and space. (5)

Managers cited the following reason for rating 2 of the 84 sites

“unsuccessful.”

Meeting the total demand

for all types of TAC

assistance
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 52 GAO-02-144 IRS' 2001 Tax Filing Season

• Employees were insufficiently trained, and sites had insufficient operating

hours. (2)

Managers cited the following reasons for rating 78 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced in

dealing with tax law questions. (77)

• Employees responded appropriately to technical questions without

referrals to other IRS areas, such as Compliance. (4)

• Low demand existed for tax law assistance. (2)

• Success was attained despite small work space. (1)

One manager cited the following reason for an “unsuccessful” rating.

• Compliance withdrew back-up support, necessitating many referrals to

other sources of assistance. (1)

Managers cited the following reasons for rating 73 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced in

providing return-preparation assistance. (38)

• The same-day appointment system facilitated the return-preparation

assistance process. (18)

• The income limitation lowered customer demand for return preparation.

(10)

• Non-IRS sources of help were available to provide assistance when

taxpayer income exceeded TAC limitations. (10)

• Electronic filing helped ensure ease, speed, and accuracy of return

preparation. (8)

Managers rated two sites “unsuccessful” because there were an

insufficient number of employees. One of the managers also cited a

reduction of Compliance back-up support as a hindrance (2)

Managers cited the following reasons for rating 82 of the 84 sites “very

successful” or “successful.”

• Required quantity of tax forms and publications were ordered and stored.

(70)

Meeting the demand for

tax law assistance

Meeting the demand for

return-preparation

assistance

Meeting the demand for

tax forms or publications
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 53 GAO-02-144 IRS' 2001 Tax Filing Season

• Adequate display racks and shelving were available, making it easier for

customers to see and select forms. (25)

• Employees were adequately trained, capable, and/or experienced in

handling forms and publications. (20)

• Ample storage space was available. (4)

• Demand for forms or publications was low, or free parking or drive up

service made it easier to obtain them. (3)

No sites were rated “unsuccessful” or “very unsuccessful” in this area.

Managers cited the following reasons for rating 78 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced, which

helped minimize wait-time. (35)

• An automated system tracked wait-times, numbers of customers, and

types of queries, keeping managers alert to wait-times. (7)

• Low customer demand existed, and employees made immediate referrals

to other sources of assistance. (4)

Managers rated 2 of the 84 sites as “unsuccessful” or “very unsuccessful.”

• Appointment scheduling caused problems that affected wait-time in a oneperson office, and the wait-time often exceeded 15 minutes. (2)

Managers cited the following reasons for rating 79 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced. (66)

• Few referrals for assistance were made to other sources of assistance, and

employees used a frequently-asked-questions guide to help identify the

proper response. (3)

No sites were rated “unsuccessful” or “very unsuccessful” in this area.

Managers cited the following reasons for rating 80 of the 84 sites “very

successful” or “successful.”

• Employees were adequately trained, capable, and/or experienced in

providing return-preparation assistance. (39)

Keeping the average waittime for assistance below

15 minutes

Providing accurate

answers to tax law

questions

Providing accurate returnpreparation assistance
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 54 GAO-02-144 IRS' 2001 Tax Filing Season

• Lower than expected rejection rates were experienced for electronically

filed returns. (25)

• Electronic filing and return-preparation software helped ensure ease,

speed, and accuracy in preparing returns. (22)

• Non-IRS sources of assistance were used to help meet demand. (3)

• The same-day appointment system was helpful, and demand for electronic

filing was light. (5)

No sites were rated “unsuccessful” or “very unsuccessful” in this category.

For each TAC in our sample, we asked managers for their views on the

extent to which each of the following factors hampered their sites’ success

during the 2001 filing season.

• Facilities

• Staffing

• Training

• Days or hours of operation

• Equipment (e.g., computers)

• Supplies (e.g., ink cartridges, paper)

• Tax forms or publications

• Policies or procedures

• Any other item they wished to identify

Although most TAC managers rated their sites’ performance during the

2001 filing season as “successful” or “very successful,” most also cited

factors (mostly related to facilities, staffing, equipment, and training) that

hindered their sites’ success, at least to some extent.

Table 6 presents our nationwide percentage estimates for managers’ views

regarding the extent that factors hampered success for all 413 TACs.

Most Managers Cited

Factors That

Hampered Their

Sites’ Success
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 55 GAO-02-144 IRS' 2001 Tax Filing Season

Table 6: Percentage Estimates of TAC Managers’ Views on the Extent to Which Certain Factors Hampered Their Sites’ Filing

Season Success

To what extent was your site’s success for the 2001

filing season hampered by factors related to To a great extent

To a moderate

extent To some extent Not at all

Facilities 23 15 35 27

Staffing 20 12 26 42

Training 6 23 32 39

Days or hours of operation 4 7 25 64

Equipment (e.g., computers) 14 17 31 38

Supplies (e.g., ink cartridge, paper) 4 7 17 73

Tax forms or publications 0 2 14 83

Policies or procedures 6 15 38 40

Other (specify)—3 managers responded 67 33 0 0

Source: GAO data and analysis.

We also asked managers for explanations whenever they answered “to a

great extent” or “to a moderate extent.” The explanations that follow are

based on the actual responses from the managers of the 84 sites in our

sample. The numbers in parentheses after each reason are the number of

sites for which that reason was cited. As was the case with table 5, some

managers cited more than one reason in explaining their responses.

Managers for 32 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• TAC facilities were too small. (29)

• General characterization. (13)

• Customer waiting areas were not large enough. (14)

• Workspace for assigned employees was not sufficient. (11)

• Private space for discussing taxpayer information was not sufficient.

(10)

• Storage space for forms and/or publications was not sufficient. (3)

• Space to accommodate computer to facilitate electronic filing was not

sufficient. (2)

• TAC facilities were not adequately designed or laid out. (12)

• General characterization. (4)

• Available equipment, including computer, printer, or copier, were not

located close enough to work area. (5)

Facilities
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 56 GAO-02-144 IRS' 2001 Tax Filing Season

• The service counter design was outdated or did not provide the privacy

needed to protect taxpayer information, or the workspace was not laid

out properly to accommodate individual workstations. (3)

• Facility-related issues other than size or layout. (5)

• Geographical location was remote and/or inconvenient, free parking

was not available, facility doors were not accessible to disabled

customers and facility heating was not adequate. (5)

Managers for 27 of the 84 TACs selected “moderate” or “great extent”. The

following reasons were cited.

• General characterization based on insufficient number of field assistance

employees. (20)

• Employees were absent because of training, or positions were vacant due

to turnover. (3)

• Insufficient back-up from IRS compliance employees or other non-field

assistance employees. (7)

• Newly hired employees lacked experience. (2)

Managers for 24 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• Employees needed more training; they received only part of required

training or needed training beyond that normally required. (18)

• Employees needed better training because either training was not effective

or subjects covered during the training were not adequately addressed. (4)

• Training was not timely, and required training was not provided

sufficiently in advance of the filing season. (7)

Managers for 9 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• More days or hours of operation were needed. (3)

• Some extended hours were underused. (3)

• Alternative hours were needed. (2)

• Too many hours were worked or hours were lost due to federal building

closing. (1)

Managers for 26 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

Staffing

Training

Days or hours of operation

Equipment
Appendix III: TAC Managers’ Views on Their

Sites’ Filing Season Performance

Page 57 GAO-02-144 IRS' 2001 Tax Filing Season

• Inadequate computers were available. (23)

• Insufficient numbers of computers were available. (13)

• Insufficient computers with a capability to access taxpayer account

information were available. (7)

• An insufficient number of computers were capable of filing returns

electronically. (3)

• Computers were outdated or malfunctioned. (7)

• Printers were inadequate or insufficient in number. (4)

• Access to a printer for a specialized collection system was shared. (3)

• Lacked access to a printer capable of printing taxpayer account

information. (1)

• Other equipment-related problems were experienced. (11)

• Equipment/technical support was lacking. (2)

• Facsimile machines were not available in sufficient numbers. (2)

• Equipment utilization limited by office design. (2)

• Other equipment deficiencies, such as the lack of return-preparation

software or a copier, were cited. (5)

Managers for 9 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• Overall shortage of printer ink cartridges and requisitioning problems

existed. (9)

Managers for 2 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• Storage space was insufficient. (1)

• Forms and publications were not available at the beginning of the filing

season. (1)

Managers for 18 of the 84 TACs selected “moderate” or “great extent.” The

following reasons were cited.

• Problems with, or negative reactions to, the new income limitation on

return-preparation assistance and/or the new same-day appointment

process for that assistance. (14)

Managers for 3 of the 84 TACs cited other factors that hampered their

site’s success to a “moderate” or “great extent,” such as the need for

security guards.

Supplies

Tax forms or publications

Policies or procedures

Other
Appendix IV: Comments From the Internal Revenue Service

Page 58 GAO-02-144 IRS' 2001 Tax Filing Season

Appendix IV: Comments From the Internal

Revenue Service
Appendix IV: Comments From the Internal Revenue Service

Page 59 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 60 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 61 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 62 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 63 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 64 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix IV: Comments From the Internal Revenue Service

Page 65 GAO-02-144 IRS' 2001 Tax Filing Season
Appendix V: GAO Contacts and Staff

Acknowledgments

Page 66 GAO-02-144 IRS' 2001 Tax Filing Season

James White (202) 512-9110

David Attianese (202) 512-9110

In addition to those named above, Bob Arcenia, Pat Brewer, Rudy Chatlos,

Ron Heisterkamp, Janelle Hu, Brian James, Ron Jones, John Lesser, and

Joanna Stamatiades made key contributions to this report.

Appendix V: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(440014)
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Web site: www.gao.gov/fraudnet/fraudnet.htm,

E-mail: fraudnet@gao.gov, or

1-800-424-5454 or (202) 512-7470 (automated answering system).

Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800

U.S. General Accounting Office, 441 G. Street NW, Room 7149,

Washington, D.C. 20548

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